##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto.
 Commission File Number: 0-18033
 
 EXABYTE CORPORATION
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    84-0988566(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)2108 55th Street, Boulder, Colorado
    
    80301(Address of principal executive offices)
    
    (Zip Code)
 (303) 442-4333
  (Title of each class)
    
    (Name of each exchange on which registered)N/A
    
    N/A
  Common Stock, $.001 Par Value
 Yes o No þ
 Yes o No þ
 Yes þ No o
 o
  Large accelerated filer o Accelerated filer o Non-accelerated filer þ
 Yes o No þ
 (a)
  DOCUMENTS INCORPORATED BY REFERENCE:
  GENERAL INFORMATION ABOUT THE INFORMATION IN THIS REPORT
 This report includes certain forward-looking statements
  
 (a)
    
    Excludes 5,828,565 shares of common stock
held by directors, executive officers and stockholders whose ownership exceeds
ten percent of the common stock outstanding at June 30, 2005. Exclusion of
shares held by any person should not be construed to indicate that such person
possesses the power, direct or indirect, to direct or cause the direction of
the management or policies of registrant, or that such person is controlled by
or under common control with the registrant.




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TABLE OF CONTENTS  PART IITEM 1ITEM 1AITEM 2ITEM 3ITEM 4PART IIITEM 5ITEM 6ITEM 7ITEM 7AITEM 8ITEM 9ITEM 9AITEM 9BPART IIIITEM 10ITEM 11ITEM 12ITEM 13ITEM 14PART IVITEM 15(A) 3. EXHIBIT INDEXSIGNATURESList of SubsidiariesConsent of PricewaterhouseCoopers LLPConsent of Ehrhardt Keefe Steiner & Hottman PCRule 13a-14(a) Certification of CEORule 13a-14(a) Certification of CFOSection 1350 Certification    Table of Contents  
 PART I
 
 ITEM 1.
 INFORMATION REGARDING OUR BUSINESS
 Our Business
   
    
    Increase the capacity and performance of tape storage products, and
    
    Reduce the price of storage on tape compared to other media.
   Our Products
 VXA Packet Technology
 11* 22*
    1




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##### Table of Contents



LTO (Ultrium) Technology
  MammothTape Technology
  Automation and ExaBotics
  2




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##### Table of Contents



Hardware Sales Data
  Year
    
    % of Revenue2003
    
    
    30
    %2004
    
    
    32
    %2005
    
    
    23
    %
  Year
    
    % of Revenue2003
    
    
    14
    %2004
    
    
    24
    %2005
    
    
    37
    %
 Our Tape Drive And Automation Products
  3




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##### Table of Contents



430 convenient rack  mount accommodated data storage for distributed networking
environments 30 catridges, up to 4.5 tb (compressed ) 4 vxa  2 packet drives, up to 173
gb/hr ( compressed ultra 2 lvd scsi x tape :x23, x 101 , x61 vxa  320 packet loader 1x 10 1 u vxa  320 automated backup solution with best in class rack data
density, and economy,l 10 catridges, up to 3.2 tb (compressed) up to 66.4 gb / hr ( compressed) hd
lvd scsi 3 ultra 160 x taPE ; x 23, X 101, X 51 VXA  2 TO VXA  320 packet loader upgrade kit double the speed and capacity of existing vxa 2
packet loader 1x 10 u instatous in minutes. Double vxa-2 packet loader 1x10 1u up to 3.2 tb (
capacity ( compressed) up to 86.4 gb/hr ( compressed) hd lvd scsi 3 ultra 160 x tape x 23 ,
x101 , x61 VXA  2 Packet Loader 1x 10 1U VXA  2 automated tape backup in a space  saving 1u rack mount
design 10 catridges, up to 1.6 TB(compressed) Up to 43.2 hour ( compressed) Ultra2 LVD SCSI and
FireWire x Tape: x23, x101 , x61 VXA 2 Packet Loader 1x7 Affordable desktop automation  an ideal first step into automated data
storage 7 cartridges, up to 1.1 TB(compressed) Ultra 2 LVD SCSI x Tape : X 23 , x101
x61 VXA  320 Packet Drive Latest Generation of products built around the disaster tested VXA Packet
Technology 160 GB (native 320 GB(compressed) 6MB/sec 21 GB/hr (native) LVD, IDEIATAPI and Fire Wire
X Tape: X23, X101, X61 VXA 1 Packet Drive            Four times the capacity and twice the speed of DDS 4 80 GB native 160 GB
(compressed) 6 MB/sec 21 GB/hr ( native) LDV, IDE/ATAPI and Fire Wire VXATape : V17, V10 ,V6 VXA 1 Packet Drive Replacement technology of choice for end-of-life DDS drives 33 GB(compressed)
3MB/sec 10.8 GB/hr (native LVD,IDE/ATAPI and FireWire VXATAPE: V17,V10,v6 Magnum 6x60 Expandable, feature-rich enterprise class library at midrange pricing office with
LTO-1, LTO-2 or LTO-3 drives 143 cartridges, up to 28.6 TB WITH lto-1 57.2 TB WITH LTO-2 114.4 TB
with lto-3 8 lto 1/ lto-2/lto-3 drives 864 gb/hr lto-1 2tb/hr lto-1 2tb/hr lto-2 4.6 tb/hr lto-3
ultra 2 lvd scsi fibre channel ultrum lto 1, lto 2, & lto-3 data cartridges. magnum 6x60 Expandable, feature-rich enterprise-class library at midrange pricing. Offered with
LTO-1,LTO-2 or lto-3 drives 60 cartridges, up to 12 tb with lto-1 24 tb with lto-2 48 tb with
lto-3 6 lto 1 lto-2/ lto-3 drives 648 gb/hr lto-1 1.5 tb/hr lto 2 3.4 tb/hr lto-3 ultra 2
lvd scsi fibre channel ultrium lto-1, lto-2 & lto 3 data cartridges 221l            the
most cost-effective lto automated tape library in its class. Offered with lto-1, lto-2
or lto-3 drives. 21 cartridges, up to 4.2 tb with lto-1 8.4 tb with lto-2 16.8 tb with lto-3, 2 lto
drives. up to 216 gb.hr with lto 1 , 504 gb/hr with lto-2 1.1 tb/hr with lto-3 / ultra 2 lvd scsi
fibre channel Exabyte lto-1, lto-2, or lto-3 exapaks. 110l compact, affordable lto alternative to standalone tape drives. Offered with lto-1, lto-2, or
lto-3 drives 10 catridges, up to 2 tb with lto 1, 4 tb with lto-2, 8 tb with lto-3 lto
drives, up to 108 gb/hr with lto-1 252 gb/hr with lto-2 576 gb/hr with lto-3 ultra 2 lvd scsi
exabyte lto-1,lto-2 or lto-3 exapaks. Magnum 1x7 ultra-compact, most affordable and feature rich lto autoloader on the market. offered
with lto 2 or lto 3 drives , 7 cateridges, 2.8 tb with lto-2 5.6 tb with lto  3 lto drive.
187 gb/ hr with lto 2 576 gb/hr with lto 3 ultra 2 lvd scsi ultrium lto 1 , lto 2 or lto 3
data cartridges magnum tape drives (Lto 2) Exabytes entry leval, high performance 1/2* tape drive, delivering
enterprise class capacity and throughput 200 gb ( native ) lto drive. 400 gb/ compressed) lto
drive. 252 gb/ hr ultra  160 lvd scsi ultrium lto 1 & lto 2 data cartridges Magnum tape drive lto 3 exabytes entry leval, high performance 1/2 tape drive, delivering true
enterprise class capacity and throughput 400 gb(native) 800 gb (compressed) lto drive. 578 gb/hr
ultra 160 lvd scsi ultrum lto 1 lto 2 and lto 3 data cartridges 4




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Anticipated Future Tape Drive Products
   Media Products And Sales Data
   Year
    
    % of Revenue2003
    
    
    47
    %2004
    
    
    40
    %2005
    
    
    39
    %
  VXA Media
  AME Media with SmartClean
  5




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Outsourcing Philosophy
  
    
    manufacturing of hardware and media products;
    
    repair and onsite service, including warranty services;
    
    world-wide technical support operations which includes response to
customer inquiries; and
    
    distribution of our media products to our customers and end-users.
  Service and Support
    Year
    
    % of Revenue2003
    
    
    10
    %2004
    
    
    7
    %2005
    
    
    6
    %
  Our Customers
  Imation
  6




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OEM Customers
   Year
    
    % of Revenue2003
    
    
    20
    %2004
    
    
    24
    %2005
    
    
    23
    %
  Distributor and Reseller Customers
  
    
    distribution;
    
    financial terms and conditions;
    
    pre-sales, sales and/or post-sales system upgrades; or
    
    other value-added products and/or services.
  Year
    
    % of Revenue2003
    
    
    64
    %2004
    
    
    70
    %2005
    
    
    73
    %
 Sales to the Government
  International Customers
  7




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Year
    
    % of Revenue2003
    
    
    31
    %2004
    
    
    29
    %2005
    
    
    30
    %
 Principal Customers
  2003
    
    2004
    
    2005Imation
    
    
    9
    %
    
    
    40
    %
    
    
    41
    %Tech Data
    
    
    16
    %
    
    
    11
    %
    
    
    16
    %Ingram Micro
    
    
    16
    %
    
    
    9
    %
    
    
    12
    %Fujitsu Siemens
    
    
    6
    %
    
    
    9
    %
    
    
    10
    %IBM
    
    
    7
    %
    
    
    13
    %
    
    
    9
    %
 Manufacturing
  Tape Drives and Automation
   Media
  
    
    Matsushita Electric Industrial Co. Ltd. (MEI);
    
    TDK Corporation (TDK); and
    
    Sony Corporation (Sony).
 8




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Our Engineering, Research and Development
  Information Regarding Our Patents and Proprietary Information
   Information Regarding Our Backlog
  Information Regarding our Inventory Levels
    9




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Our Competition
   
    
    timely development and introduction;
    
    customer acceptance;
    
    adequacy of supply capacity;
    
    customer transition to these future products;
    
    OEM qualification and adoption; and
    
    media availability.
  
    
    Optical Disk
    
    Optical Tape
    
    DVD
    
    Holographic Storage
    
    Magneto-optics
    
    Magnetic Disk
     10




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Our Employees
  March 13, 2003
 Total full- and part-time employees: 318
 Business Group
    
    EmployeesCorporate and Business
    
    
    34Engineering, Research and Development
    
    
    153Customer Unit
    
    
    58Sales
    
    
    73
 January 7, 2004
 Total full- and part-time employees: 199
 Business Group
    
    EmployeesCorporate and Business
    
    
    35Engineering, Research and Development
    
    
    62Customer Unit
    
    
    52Sales
    
    
    50
 February 22, 2005
 Total full- and part-time employees: 182
 Business Group
    
    EmployeesCorporate and Business
    
    
    30Engineering, Research and Development
    
    
    67Customer Unit
    
    
    37Sales
    
    
    48
 January 18, 2006
 Total full- and part-time employees: 162
 Business Group
    
    EmployeesCorporate and Business
    
    
    29Engineering, Research and Development
    
    
    66Customer Unit
    
    
    25Sales
    
    
    42
  Available Information
 http://www.exabyte.com
 11




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##### Table of Contents



ITEM 1A.
 RISK FACTORS
 Our Business Risks
 General Information About These Business Risks
  We may need additional funding to support our operations.
  The uncertainty regarding our ability to continue as a going concern may affect the
willingness of customers and suppliers to work with us, as well as our ability to obtain
inventory and finished goods in a timely manner.
  We need to expand existing OEM customer relationships and develop new OEM customers for our
VXA and Other products in order to be successful.
  12




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Our profitability depends on decreases in our direct product costs.
  Our profitability is dependent upon increased media revenue.
  We are subject to significant risks regarding foreign operations, regulatory requirements
and fluctuations in foreign currency.
  
    
    reduced intellectual property protections;
    
    foreign government regulations;
    
    foreign tax regulations;
    
    foreign exchange control regulations;
    
    import/export restrictions;
    
    foreign economic and/or political instability; and
    
    tariffs, trade barriers and other trade restrictions by the U.S.
government in products or components shipped from or to foreign
sources.
    13




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Our manufacturers may be unable to meet our product demand, implement product engineering
changes on a timely basis, or produce product at a commercially reasonable cost.
  Our revenue is concentrated with a limited number of customers.
  Our dependencies on sole-source suppliers may affect our control over delivery, quantity,
quality and cost of products.
  
    
    delivering components on schedule;
    
    manufacturing a high volume of components;
    
    maintaining the highest possible product quality when manufacturing; and
    
    managing manufacturing costs.
  Managing our inventory levels is important to our cash position and results of
operations.
  The storage backup market is very competitive and such competition may cause us to decrease
our product pricing or affect our market share.
  14




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##### Table of Contents




    
    rapid development of tape drive technologies;
    
    customer and OEM adoption of VXA technology and our LTO automation
products;
    
    compatibility of tape drives to other data storage products;
    
    data storage density and transfer rate;
    
    customer confidence and familiarity with our products and technologies;
    
    product reliability; and
    
    price.
  Our proprietary rights may not be fully protected.
  We depend on key employees to develop, introduce and sell our products.
   
    
    delay product development schedules;
 
    
    interrupt team continuity;
 
    
    result in losing proprietary information to competitors or other
third parties;
 
    
    increase our administrative costs; and
 
    
    adversely affect our results of operations.
 15




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ITEM 2.
 PROPERTIES
  OFFICE TYPE
    
    DOMESTIC
    
    INTERNATIONALR&D & Mfg.
    
    Boulder, COProcurement
    
    Boulder, CO
    
    Tokyo, JapanService
    
    Boulder, CO
    
    SingaporeSales & Support
    
    Boulder, CO
    
    SingaporeFrankfurt, GermanyShanghai, ChinaHong Kong, ChinaParis, FranceBeijing, ChinaSydney, Australia
 
 ITEM 3.
 LEGAL PROCEEDINGS
  
 ITEM 4.
  16




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PART II
 
 ITEM 5.
 MARKET FOR THE REGISTRANTS COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
   Fiscal Year
    
    High
    
    Low2004First Quarter
    
    $
    17.60
    
    
    $
    7.00Second Quarter
    
    
    9.70
    
    
    
    7.10Third Quarter
    
    
    8.60
    
    
    
    4.30Fourth Quarter
    
    
    7.20
    
    
    
    3.002005First Quarter
    
    $
    5.40
    
    
    $
    2.60Second Quarter
    
    
    4.40
    
    
    
    1.80Third Quarter
    
    
    3.20
    
    
    
    1.70Fourth Quarter
    
    
    2.95
    
    
    
    0.752006First Quarter (through March 1, 2006)
    
    $
    1.27
    
    
    $
    0.75
  RECENT SALES OF UNREGISTERED SECURITIES.
 Director Compensation
   17




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Preferred Stock Transactions
   Convertible Notes Transaction
   18




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STOCK PLANS
  Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    
    Weighted-average
    
    
    equity compensationbe issued upon exercise
    
    
    exercise price of
    
    
    plans (excludingof outstanding options,
    
    
    outstanding options,
    
    
    securities reflected inwarrants and rights
    
    
    warrants and rights
    
    
    column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
(1)
    
    
    2,659,265
    
    
    $
    8.7884
    
    
    
    1,087,720Equity compensation
plans not approved
by security holders
(2)
    
    
    7,857,219
    
    
    $
    1.7880
    
    
    
    1,312,862Total
    
    
    10,516,484
    
    
    $
    3.5582
    
    
    
    2,400,582
 
 (1)
    
    Amount includes shares issued under a stock option plan approved by stockholders on July
30, 2002 for the issuance of options to Mr. Ward of up to 700,000 shares and the 2004 Employee
Stock Option Plan, which was approved by stockholders on June 11, 2004.(2)
    
    Amount includes the 1997 Non-Officer Stock Option Plan, under which options may be granted
to employees who are not officers or directors of the Company, the stock option plan approved by
the Board of Directors in 2003 for the issuance of options to Mr. Ward for an additional 700,000
shares, and the 2005 Employee Stock Option Plan, which was approved by the Board of Directors on
December 1, 2005. A description of these compensation plans not approved by stockholders is contained below in Item 11 and Note 5 to the consolidated financial statements. 19




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##### Table of Contents



ITEM 6.
 SELECTED FINANCIAL DATA
  20




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As of or For Fiscal Years EndedDec. 31, 2004Dec. 29, 2001
    
    
    Dec. 28, 2002
    
    
    Jan. 3, 2004
    
    
    (Restated)(1)
    
    
    Dec. 31, 2005Consolidated Statements of
Operations Data:Net revenue
    
    $
    158,438
    
    
    $
    133,191
    
    
    $
    94,169
    
    
    $
    102,051
    
    
    $
    90,968Cost of goods sold
    
    
    132,143
    
    
    
    110,948
    
    
    
    78,576
    
    
    
    76,997
    
    
    
    65,395Gross profit
    
    
    26,295
    
    
    
    22,243
    
    
    
    15,593
    
    
    
    25,054
    
    
    
    25,573Operating expenses:Selling, general and
administrative
    
    
    36,759
    
    
    
    27,316
    
    
    
    30,084
    
    
    
    23,783
    
    
    
    20,913Engineering, research and
development
    
    
    25,184
    
    
    
    23,713
    
    
    
    9,826
    
    
    
    9,244
    
    
    
    9,395Lease terminations and
related costs
    
    
    
    
    
    
    
    
    
    
    4,707
    
    
    
    
    
    
    
    Total operating expenses
    
    
    61,943
    
    
    
    51,029
    
    
    
    44,617
    
    
    
    33,027
    
    
    
    30,308Loss from operations (2)
    
    
    (35,648
    )
    
    
    (28,786
    )
    
    
    (29,024
    )
    
    
    (7,973
    )
    
    
    (4,735
    )Other income (expense):Gain from sale of investment
    
    
    1,719
    
    
    
    1,500
    
    
    
    
    
    
    
    
    
    
    
    Sale of technology
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    86
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    Interest expense (4)
    
    
    (1,715
    )
    
    
    (2,051
    )
    
    
    (12,859
    )
    
    
    (1,581
    )
    
    
    (1,960
    )Change in estimated fair
value of derivative financial
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,074
    
    
    
    (3,807
    )Other financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,330
    )
    
    
    (1,964
    )Gain (loss) on foreign
currency translation
    
    
    124
    
    
    
    (803
    )
    
    
    (1,851
    )
    
    
    (105
    )
    
    
    793Litigation settlements, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Other, net
    
    
    338
    
    
    
    (561
    )
    
    
    130
    
    
    
    (208
    )
    
    
    (312
    )Total other income (expense)
    
    
    552
    
    
    
    (688
    )
    
    
    (14,580
    )
    
    
    31,850
    
    
    
    (7,175
    )Earnings (loss) before income
taxes
and equity in loss of investee
    
    
    (35,096
    )
    
    
    (29,474
    )
    
    
    (43,604
    )
    
    
    23,877
    
    
    
    (11,910
    )Income tax (expense) benefit
(3)
    
    
    6
    
    
    
    402
    
    
    
    (88
    )
    
    
    (47
    )
    
    
    (160
    )Equity in loss of investee
    
    
    (343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    
    (35,433
    )
    
    
    (29,072
    )
    
    
    (43,692
    )
    
    
    23,830
    
    
    
    (12,070
    )Deemed dividends:Beneficial conversion of
preferred stock
    
    
    
    
    
    
    (4,557
    )
    
    
    (556
    )
    
    
    
    
    
    
    Exchange of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,225
    )
    
    
    Issuance of Series AA
convertible preferred
stock and amortization of
related discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,404
    )
    
    
    (990
    )Net loss available to common
stockholders
    
    $
    (35,433
    )
    
    $
    (33,629
    )
    
    $
    (44,248
    )
    
    $
    (25,799
    )
    
    $
    (13,060
    )Basic and diluted loss per
share
    
    $
    (14.73
    )
    
    $
    (10.18
    )
    
    $
    (6.96
    )
    
    $
    (2.44
    )
    
    $
    (1.10
    )Weighted average common
shares used in calculation of
basic and diluted loss per
share
    
    
    2,405
    
    
    
    3,302
    
    
    
    6,362
    
    
    
    10,583
    
    
    
    11,912
 21




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##### Table of Contents



As of or For Fiscal Years EndedDec. 31, 2004Dec. 29, 2001
    
    
    Dec. 28, 2002
    
    
    Jan. 3, 2004
    
    
    (Restated)(1)
    
    
    Dec. 31, 2005Consolidated
Balance Sheets Data:Working capital (deficit)
    
    $
    11,266
    
    
    $
    (5,199
    )
    
    $
    (6,561
    )
    
    $
    2,988
    
    
    $
    (1,042
    )Total assets
    
    
    83,230
    
    
    
    72,125
    
    
    
    46,129
    
    
    
    39,979
    
    
    
    34,715Notes payable, less current
portion
    
    
    
    
    
    
    
    
    
    
    13,960
    
    
    
    9,183
    
    
    
    8,898Derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,165
    
    
    
    27,060Deferred revenue and other
non-current liabilities, less
current portions
    
    
    9,594
    
    
    
    3,424
    
    
    
    18,419
    
    
    
    16,443
    
    
    
    5,503Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,941
    
    
    
    38,931Stockholders equity (deficit)
    
    
    24,754
    
    
    
    4,532
    
    
    
    (28,416
    )
    
    
    (60,858
    )
    
    
    (70,891
    )Consolidated Cash Flow Data:Net cash provided (used) by
operating activities
    
    $
    (11,913
    )
    
    $
    (13,267
    )
    
    $
    23,258
    
    
    $
    (13,357
    )
    
    $
    (4,880
    )Net cash provided (used) by
investing activities
    
    
    2,828
    
    
    
    (2,054
    )
    
    
    (2,393
    )
    
    
    (1,761
    )
    
    
    (1,855
    )Net cash provided (used) by
financing activities
    
    
    8,123
    
    
    
    13,788
    
    
    
    (14,550
    )
    
    
    8,583
    
    
    
    6,721
 
 (1)
    
    Amounts as of and for the year ended December 31, 2004 are as restated, as discussed
more fully in Managements Discussion and Analysis of Financial Condition and Results of
Operations.(2)
    
    The Company recorded restructuring charges in 2001 and 2002 totaling $498,000 and
$4,791,000, respectively, and $549,000, $251,000 and $470,000 of charges relating to workforce
reductions in 2003, 2004 and 2005, respectively. See Note 10 to the Consolidated Financial
Statements for information regarding workforce reduction charges included in loss from operations
in 2003, 2004 and 2005.(3)
    
    The Company has recorded a valuation allowance equal to total deferred tax assets as of
and for all periods presented. See Note 9 to the Consolidated Financial Statements for information
on income tax expense or benefit and net operating loss carry forwards.(4)
    
    Interest expense in 2003 includes $10,146,000 of stock-based interest expense as
discussed in Note 4 to the Consolidated Financial Statements 22




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##### Table of Contents



QUARTERLY RESULTS OF OPERATIONS /
SUPPLEMENTARY FINANCIAL INFORMATION
   Three Months EndedJune 30,
    
    
    September 30,
    
    
    December 31,March 31,
    
    
    2004
    
    
    2004
    
    
    20042004
    
    
    (Restated)(1)
    
    
    (Restated)(1)
    
    
    (Restated)(1)$
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %Net revenue
    
    $
    26,139
    
    
    
    100.0
    
    
    $
    26,620
    
    
    
    100.0
    
    
    $
    23,566
    
    
    
    100.0
    
    
    $
    25,726
    
    
    
    100.0Cost of goods sold
    
    
    20,053
    
    
    
    76.7
    
    
    
    19,173
    
    
    
    72.0
    
    
    
    18,604
    
    
    
    78.9
    
    
    
    19,167
    
    
    
    74.5Gross profit
    
    
    6,086
    
    
    
    23.3
    
    
    
    7,447
    
    
    
    28.0
    
    
    
    4,962
    
    
    
    21.1
    
    
    
    6,559
    
    
    
    25.5Operating expenses: (2)Selling, general and administrative
    
    
    6,069
    
    
    
    23.2
    
    
    
    6,064
    
    
    
    22.8
    
    
    
    6,236
    
    
    
    26.5
    
    
    
    5,414
    
    
    
    21.0Engineering, research and development
    
    
    2,130
    
    
    
    8.2
    
    
    
    2,513
    
    
    
    9.4
    
    
    
    2,240
    
    
    
    9.5
    
    
    
    2,361
    
    
    
    9.2Total operating expenses
    
    
    8,199
    
    
    
    31.4
    
    
    
    8,577
    
    
    
    32.2
    
    
    
    8,476
    
    
    
    36.0
    
    
    
    7,775
    
    
    
    30.2Loss from operations
    
    
    (2,113
    )
    
    
    (8.1
    )
    
    
    (1,130
    )
    
    
    (4.2
    )
    
    
    (3,514
    )
    
    
    (14.9
    )
    
    
    (1,216
    )
    
    
    (4.7
    )Other income (expense):Interest expense
    
    
    (528
    )
    
    
    (2.0
    )
    
    
    (426
    )
    
    
    (1.6
    )
    
    
    (284
    )
    
    
    (1.2
    )
    
    
    (343
    )
    
    
    (1.3
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    (3,961
    )
    
    
    (14.9
    )
    
    
    30,387
    
    
    
    128.9
    
    
    
    8,648
    
    
    
    33.6Other financing costs
    
    
    
    
    
    
    
    
    
    
    (1,330
    )
    
    
    (5.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (loss) on foreign currency translation
    
    
    (603
    )
    
    
    (2.3
    )
    
    
    1,091
    
    
    
    4.1
    
    
    
    72
    
    
    
    .3
    
    
    
    (665
    )
    
    
    (2.6
    )Other, net
    
    
    (28
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    (0.5
    )
    
    
    (32
    )
    
    
    (0.1
    )Total other income (expense)
    
    
    (1,159
    )
    
    
    (4.4
    )
    
    
    (4,626
    )
    
    
    (17.4
    )
    
    
    30,026
    
    
    
    127.5
    
    
    
    7,608
    
    
    
    29.6Loss before income taxes
    
    
    (3,272
    )
    
    
    (12.5
    )
    
    
    (5,756
    )
    
    
    (21.6
    )
    
    
    26,512
    
    
    
    112.6
    
    
    
    6,392
    
    
    
    24.9Income tax (expense) benefit
    
    
    (38
    )
    
    
    (0.2
    )
    
    
    9
    
    
    
    
    
    
    
    (5
    )
    
    
    (0.1
    )
    
    
    (12
    )
    
    
    (0.1
    )Net earnings (loss)
    
    
    (3,310
    )
    
    
    (12.7
    )
    
    
    (5,747
    )
    
    
    (21.6
    )
    
    
    26,507
    
    
    
    112.5
    
    
    
    6,380
    
    
    
    24.8Deemed dividends:Exchange of preferred stock
    
    
    
    
    
    
    
    
    
    
    (4,225
    )
    
    
    (15.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Series AA convertible preferred
stock and amortization of related discount
    
    
    
    
    
    
    
    
    
    
    (45,024
    )
    
    
    (169.1
    )
    
    
    (181
    )
    
    
    (0.8
    )
    
    
    (199
    )
    
    
    (0.8
    )Net earnings (loss) available to common
stockholders
    
    $
    (3,310
    )
    
    
    (12.7
    )
    
    $
    (54,996
    )
    
    
    (206.6
    )
    
    $
    26,326
    
    
    
    111.7
    
    
    $
    6,181
    
    
    
    24.0Basic earnings (loss) per share
    
    $
    (0.34
    )
    
    
    
    
    
    $
    (5.12
    )
    
    
    
    
    
    $
    2.41
    
    
    
    
    
    
    $
    0.56Diluted loss per share
    
    $
    (0.34
    )
    
    
    
    
    
    $
    (5.12
    )
    
    
    
    
    
    $
    (0.24
    )
    
    
    
    
    
    $
    (0.14
    )
 23




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2005
    
    
    2005
    
    
    2005
    
    
    2005(Restated)(1)
    
    
    (Restated)(1)
    
    
    (Restated)(1)$
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %
    
    
    $
    
    
    %Net revenue
    
    $
    24,623
    
    
    
    100.0
    
    
    $
    23,776
    
    
    
    100.0
    
    
    $
    21,306
    
    
    
    100.0
    
    
    $
    21,263
    
    
    
    100.0Cost of goods sold
    
    
    17,455
    
    
    
    70.9
    
    
    
    16,708
    
    
    
    70.3
    
    
    
    15,484
    
    
    
    72.7
    
    
    
    15,748
    
    
    
    74.1Gross profit
    
    
    7,168
    
    
    
    29.1
    
    
    
    7,068
    
    
    
    29.7
    
    
    
    5,822
    
    
    
    27.3
    
    
    
    5,515
    
    
    
    25.9Operating expenses: (2)Selling, general and administrative
    
    
    5,501
    
    
    
    22.3
    
    
    
    5,437
    
    
    
    22.8
    
    
    
    5,555
    
    
    
    26.1
    
    
    
    4,420
    
    
    
    20.8Engineering, research and
development
    
    
    2,452
    
    
    
    10.0
    
    
    
    2,520
    
    
    
    10.6
    
    
    
    2,316
    
    
    
    10.8
    
    
    
    2,107
    
    
    
    9.9Total operating expenses
    
    
    7,953
    
    
    
    32.3
    
    
    
    7,957
    
    
    
    33.4
    
    
    
    7,871
    
    
    
    36.9
    
    
    
    6,527
    
    
    
    30.7Loss from operations
    
    
    (785
    )
    
    
    (3.2
    )
    
    
    (889
    )
    
    
    (3.7
    )
    
    
    (2,049
    )
    
    
    (9.6
    )
    
    
    (1,012
    )
    
    
    (4.8
    )Other income (expense):Interest expense
    
    
    (402
    )
    
    
    (1.6
    )
    
    
    (353
    )
    
    
    (1.5
    )
    
    
    (387
    )
    
    
    (1.8
    )
    
    
    (818
    )
    
    
    (3.8
    )Change in estimated fair value of
derivative financial instruments
    
    
    5,099
    
    
    
    20.7
    
    
    
    (4,311
    )
    
    
    (18.1
    )
    
    
    (25,972
    )
    
    
    (121.9
    )
    
    
    21,377
    
    
    
    100.5Other financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,964
    )
    
    
    (9.2
    )Gain on foreign currency
translation
    
    
    295
    
    
    
    1.2
    
    
    
    198
    
    
    
    0.7
    
    
    
    200
    
    
    
    0.9
    
    
    
    100
    
    
    
    0.5Litigation settlements
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    (4.7
    )
    
    
    
    
    
    
    
    
    
    
    1,200
    
    
    
    5.6Other, net
    
    
    (31
    )
    
    
    (0.1
    )
    
    
    (33
    )
    
    
    (0.1
    )
    
    
    (54
    )
    
    
    (0.2
    )
    
    
    (193
    )
    
    
    (0.9
    )Total other income (expense)
    
    
    4,961
    
    
    
    20.2
    
    
    
    (5,624
    )
    
    
    (23.7
    )
    
    
    (26,213
    )
    
    
    (123.0
    )
    
    
    19,702
    
    
    
    92.7Earnings (loss) before income taxes
    
    
    4,176
    
    
    
    17.0
    
    
    
    (6,513
    )
    
    
    (27.4
    )
    
    
    (28,262
    )
    
    
    (132.6
    )
    
    
    18,690
    
    
    
    87.9Income tax expense
    
    
    (8
    )
    
    
    (0.1
    )
    
    
    (5
    )
    
    
    
    
    
    
    (6
    )
    
    
    (0.1
    )
    
    
    (141
    )
    
    
    (0.7
    )Net earnings (loss)
    
    
    4,168
    
    
    
    16.9
    
    
    
    (6,518
    )
    
    
    (27.4
    )
    
    
    (28,268
    )
    
    
    (132.7
    )
    
    
    18,549
    
    
    
    87.2Deemed dividend related to issuance of
Series AA convertible preferred stock
and amortization of related discount
    
    
    (217
    )
    
    
    (0.9
    )
    
    
    (237
    )
    
    
    (1.0
    )
    
    
    (257
    )
    
    
    (1.2
    )
    
    
    (279
    )
    
    
    (1.3
    )Net earnings (loss) available to common
stockholders
    
    $
    3,951
    
    
    
    16.0
    
    
    $
    (6,755
    )
    
    
    (28.4
    )
    
    $
    (28,525
    )
    
    
    (133.9
    )
    
    $
    18,270
    
    
    
    85.9Basic earnings (loss) per share
    
    $
    0.35
    
    
    
    
    
    
    $
    (0.59
    )
    
    
    
    
    
    $
    (2.44
    )
    
    
    
    
    
    $
    1.37Diluted loss per share
    
    $
    (0.06
    )
    
    
    
    
    
    $
    (0.59
    )
    
    
    
    
    
    $
    (2.44
    )
    
    
    
    
    
    $
    (0.05
    )
 
 (1)
    
    Amounts are as restated, as discussed more fully in Managements Discussion and Analysis of Financial Condition and Results of Operations.(2)
    
    See Note 10 to the Consolidated Financial Statements for information regarding workforce reduction charges included in loss from operations in 2004 and 2005. 24




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##### Table of Contents



ITEM 7.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 )
       25




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##### Table of Contents



Recent Developments In 2005
 Convertible Notes and Series AA Preferred Stock
   Modification of Media Distribution Agreement
  Reverse Stock Split
  Workforce Reductions
  26




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##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition and Uncollectible Accounts Receivable
    Inventory Valuation and Reserves
  Goodwill
  27




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##### Table of Contents



Derivative Financial Instruments
  Recent Accounting Pronouncements
  28




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##### Table of Contents



RESULTS OF OPERATIONS
  Consolidated Statements Of Operations
  Fiscal Years EndedJanuary 3, 2004
    
    
    December 31, 2004 (1)
    
    
    December 31, 2005%
    
    
    
    
    
    
    
    
    
    
    %% of
    
    
    Increase
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    
    
    
    
    % of$
    
    
    Revenue
    
    
    (decrease)
    
    
    $
    
    
    Revenue
    
    
    (decrease)
    
    
    $
    
    
    RevenueNet revenue
    
    $
    94,169
    
    
    
    100.0
    
    
    
    8.4
    
    
    $
    102,051
    
    
    
    100.0
    
    
    
    (10.9
    )
    
    $
    90,968
    
    
    
    100.0Cost of goods sold
    
    
    78,576
    
    
    
    83.4
    
    
    
    (2.0
    )
    
    
    76,997
    
    
    
    75.4
    
    
    
    (15.1
    )
    
    
    65,395
    
    
    
    71.9Gross profit
    
    
    15,593
    
    
    
    16.6
    
    
    
    60.7
    
    
    
    25,054
    
    
    
    24.6
    
    
    
    2.1
    
    
    
    25,573
    
    
    
    28.1Operating expenses:Selling, general and
administrative
    
    
    30,084
    
    
    
    31.9
    
    
    
    (20.9
    )
    
    
    23,783
    
    
    
    23.3
    
    
    
    (12.1
    )
    
    
    20,913
    
    
    
    23.0Engineering, research and
development
    
    
    9,826
    
    
    
    10.4
    
    
    
    (5.9
    )
    
    
    9,244
    
    
    
    9.1
    
    
    
    1.6
    
    
    
    9,395
    
    
    
    10.3Lease terminations and
related costs
    
    
    4,707
    
    
    
    5.0
    
    
    
    (100.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    44,617
    
    
    
    47.3
    
    
    
    (26.0
    )
    
    
    33,027
    
    
    
    32.4
    
    
    
    (8.2
    )
    
    
    30,308
    
    
    
    33.3Loss from operations
    
    
    (29,024
    )
    
    
    (30.7
    )
    
    
    72.5
    
    
    
    (7,973
    )
    
    
    (7.8
    )
    
    
    40.6
    
    
    
    (4,735
    )
    
    
    (5.2
    )Other income (expense):Interest expense
    
    
    (12,859
    )
    
    
    (13.7
    )
    
    
    87.7
    
    
    
    (1,581
    )
    
    
    (1.5
    )
    
    
    (24.0
    )
    
    
    (1,960
    )
    
    
    (2.2
    )Change in estimated fair
value of derivative
financial instruments
    
    
    
    
    
    
    
    
    
    
    100.0
    
    
    
    35,074
    
    
    
    34.3
    
    
    
    (110.9
    )
    
    
    (3,807
    )
    
    
    (4.2
    )Other financing costs
    
    
    
    
    
    
    
    
    
    
    100.0
    
    
    
    (1,330
    )
    
    
    (1.3
    )
    
    
    (48.0
    )
    
    
    (1,964
    )
    
    
    (2.2
    )Gain (loss) on foreign
currency translation
    
    
    (1,851
    )
    
    
    (2.0
    )
    
    
    94.3
    
    
    
    (105
    )
    
    
    (0.1
    )
    
    
    855.2
    
    
    
    793
    
    
    
    0.9Litigation settlements, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.0
    
    
    
    75
    
    
    
    0.1Other, net
    
    
    130
    
    
    
    0.1
    
    
    
    (259.2
    )
    
    
    (208
    )
    
    
    (0.2
    )
    
    
    (49.5
    )
    
    
    (312
    )
    
    
    (0.3
    )Total other income (expense)
    
    
    (14,580
    )
    
    
    (15.6
    )
    
    
    318.5
    
    
    
    31,850
    
    
    
    31.2
    
    
    
    (122.6
    )
    
    
    (7,175
    )
    
    
    (7.9
    )Earnings (loss) before income
taxes
    
    
    (43,604
    )
    
    
    (46.3
    )
    
    
    154.8
    
    
    
    23,877
    
    
    
    23.4
    
    
    
    (149.9
    )
    
    
    (11,910
    )
    
    
    (13.1
    )Income tax expense
    
    
    (88
    )
    
    
    (0.1
    )
    
    
    46.6
    
    
    
    (47
    )
    
    
    
    
    
    
    (240.4
    )
    
    
    (160
    )
    
    
    (0.2
    )Net earnings (loss)
    
    
    (43,692
    )
    
    
    (46.4
    )
    
    
    154.6
    
    
    
    23,830
    
    
    
    23.4
    
    
    
    (150.7
    )
    
    
    (12,070
    )
    
    
    (13.3
    )Deemed dividends:Beneficial conversion of
preferred stock
    
    
    (556
    )
    
    
    (0.6
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange of preferred stock
    
    
    
    
    
    
    
    
    
    
    100.0
    
    
    
    (4,225
    )
    
    
    (4.1
    )
    
    
    100.0
    
    
    
    
    
    
    
    Issuance of Series AA
convertible preferred stock
and amortization of related
discount
    
    
    
    
    
    
    
    
    
    
    (100.0
    )
    
    
    (45,404
    )
    
    
    (44.5
    )
    
    
    97.8
    
    
    
    (990
    )
    
    
    (1.1
    )Net loss available to common
stockholders
    
    $
    (44,248
    )
    
    
    (47.0
    )
    
    
    143.2
    
    
    $
    (25,799
    )
    
    
    (25.2
    )
    
    
    49.3
    
    
    $
    (13,060
    )
    
    
    (14.4
    )Basic and diluted loss per share
    
    $
    (6.96
    )
    
    
    
    
    
    
    126.0
    
    
    $
    (2.44
    )
    
    
    
    
    
    
    54.9
    
    
    $
    (1.10
    )
 
 (1)
    
    Amounts are as restated, as discussed more fully herein and in Note 8 to the consolidated
financial statements. 29




---



##### Table of Contents



Net Revenue by Product Type and Technology Platform
  Fiscal Year Ended2003
    
    
    2004
    
    
    2005Drives
    
    $
    28,415
    
    
    $
    32,666
    
    
    $
    20,685Automation
    
    
    13,444
    
    
    
    24,036
    
    
    
    33,431Media
    
    
    44,457
    
    
    
    41,146
    
    
    
    35,705Service and other
    
    
    9,077
    
    
    
    7,413
    
    
    
    5,355Sales allowances
    
    
    (1,224
    )
    
    
    (3,210
    )
    
    
    (4,208
    )$
    94,169
    
    
    $
    102,051
    
    
    $
    90,968
 Fiscal Year Ended2003
    
    
    2004
    
    
    2005Drives
    
    
    30.2
    %
    
    
    32.0
    %
    
    
    22.7
    %Automation
    
    
    14.3
    
    
    
    23.5
    
    
    
    36.8Media
    
    
    47.2
    
    
    
    40.3
    
    
    
    39.2Service and other
    
    
    9.6
    
    
    
    7.3
    
    
    
    5.9Sales allowances
    
    
    (1.3
    )
    
    
    (3.1
    )
    
    
    (4.6
    )100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Fiscal Year Ended2003
    
    
    2004
    
    
    2005VXA
    
    $
    31,974
    
    
    $
    58,193
    
    
    $
    49,337Legacy
    
    
    52,007
    
    
    
    28,200
    
    
    
    17,721LTO
    
    
    7,962
    
    
    
    12,259
    
    
    
    23,915Other, non-allocable
    
    
    2,226
    
    
    
    3,399
    
    
    
    (5
    )$
    94,169
    
    
    $
    102,051
    
    
    $
    90,968
 Fiscal Year Ended2003
    
    
    2004
    
    
    2005VXA
    
    
    34.0
    %
    
    
    57.0
    %
    
    
    54.2
    %Legacy
    
    
    55.2
    
    
    
    27.6
    
    
    
    19.5LTO
    
    
    8.4
    
    
    
    12.0
    
    
    
    26.3Other, non-allocable
    
    
    2.4
    
    
    
    3.4
    
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Fiscal 2005 Compared to 2004
  30




---



##### Table of Contents



Fiscal 2004 Compared to 2003
  31




---



##### Table of Contents



Net Revenue by Customer Type
  Fiscal Year Ended2003
    
    
    2004
    
    
    2005Distributor/Reseller
    
    
    68.5
    %
    
    
    70.0
    %
    
    
    73.0
    %OEM
    
    
    20.4
    
    
    
    24.3
    
    
    
    23.1End user and other
    
    
    11.1
    
    
    
    5.7
    
    
    
    3.9100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Fiscal 2005 Compared to 2004
   Fiscal 2004 Compared to 2003
  Net Revenue by Geographic Region
  Fiscal Year Ended2003
    
    
    2004
    
    
    2005United States
    
    
    69.1
    %
    
    
    71.2
    %
    
    
    69.6
    %Europe
    
    
    22.7
    
    
    
    22.8
    
    
    
    26.5Asia Pacific
    
    
    7.7
    
    
    
    4.5
    
    
    
    3.5Other
    
    
    0.5
    
    
    
    1.5
    
    
    
    0.4100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 32




---



##### Table of Contents



Fiscal 2005 Compared to 2004
  Fiscal 2004 Compared to 2003
   Significant Customers
  Fiscal Year Ended2003
    
    2004
    
    2005Imation
    
    
    8.8
    %
    
    
    39.8
    %
    
    
    40.6
    %Tech Data
    
    
    16.2
    
    
    
    10.5
    
    
    
    16.1Ingram Micro
    
    
    16.0
    
    
    
    9.0
    
    
    
    11.7Fujitsu Siemens
    
    
    5.9
    
    
    
    8.7
    
    
    
    9.8IBM
    
    
    6.8
    
    
    
    12.9
    
    
    
    8.5
  Cost of Sales and Gross Margin
  Fiscal Year 2005 Compared to 2004
  33




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##### Table of Contents



Fiscal Year 2004 Compared to 2003
  Selling, General and Administrative
  Fiscal Year 2005 Compared to 2004
  Fiscal Year 2004 Compared to 2003
  Engineering, Research And Development
  Fiscal Year 2005 Compared to 2004
  Fiscal Year 2004 Compared to 2003
  34




---



##### Table of Contents



Lease Terminations and Related Costs
    Other Income (Expense), Net
  Fiscal Year 2005 Compared to 2004
     35




---



##### Table of Contents



Fiscal Year 2004 Compared to 2003
    Taxes
   Loss Per Share
  Restatement of Previously Issued Financial Statements
  36




---



##### Table of Contents



37




---



##### Table of Contents



As of or for the three months endedJune 30, 2004
    
    September 30, 2004
    
    December 31, 2004As reported
    
    As restated
    
    As reported
    
    As restated
    
    As reported
    
    As restatedStatement of Operations:Net revenue
    
    $
    26,620
    
    
    $
    26,620
    
    
    $
    23,566
    
    
    $
    23,566
    
    
    $
    25,726
    
    
    $
    25,726Gross Profit
    
    
    7,447
    
    
    
    7,447
    
    
    
    4,962
    
    
    
    4,962
    
    
    
    6,559
    
    
    
    6,559Loss from operations
    
    
    (1,130
    )
    
    
    (1,130
    )
    
    
    (3,514
    )
    
    
    (3,514
    )
    
    
    (1,216
    )
    
    
    (1,216
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    (3,961
    )
    
    
    
    
    
    
    30,387
    
    
    
    
    
    
    
    8,648Other financing costs
    
    
    
    
    
    
    (1,330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    
    (456
    )
    
    
    (5,747
    )
    
    
    (3,881
    )
    
    
    26,507
    
    
    
    (2,267
    )
    
    
    6,380Deemed
dividends  issuance of
Series AA and amortization of
related discount
    
    
    
    
    
    
    (45,024
    )
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    (199
    )Net earnings (loss) available to
common shareholders
    
    
    (4,681
    )
    
    
    (54,996
    )
    
    
    (3,881
    )
    
    
    26,326
    
    
    
    (2,267
    )
    
    
    6,181Basic earnings (loss) per share
    
    
    (0.44
    )
    
    
    (5.12
    )
    
    
    (0.37
    )
    
    
    2.41
    
    
    
    (0.20
    )
    
    
    0.56Diluted loss per share
    
    
    (0.44
    )
    
    
    (5.12
    )
    
    
    (0.37
    )
    
    
    (0.24
    )
    
    
    (0.20
    )
    
    
    (0.14
    )Balance Sheet:Current assets
    
    $
    35,972
    
    
    $
    35,972
    
    
    $
    28,635
    
    
    $
    28,635
    
    
    $
    29,093
    
    
    $
    29,093Current liabilities
    
    
    26,561
    
    
    
    26,561
    
    
    
    21,925
    
    
    
    21,925
    
    
    
    26,105
    
    
    
    26,105Notes payable, less current portion
    
    
    8,217
    
    
    
    8,217
    
    
    
    10,090
    
    
    
    10,090
    
    
    
    9,183
    
    
    
    9,183Derivative financial instruments,
at estimated fair value
    
    
    
    
    
    
    50,200
    
    
    
    
    
    
    
    19,813
    
    
    
    
    
    
    
    11,165Deferred
revenue and other
non-current liabilities
    
    
    17,694
    
    
    
    17,694
    
    
    
    16,757
    
    
    
    16,757
    
    
    
    16,443
    
    
    
    16,443Series AA convertible preferred
stock, net
    
    
    
    
    
    
    37,561
    
    
    
    
    
    
    
    37,742
    
    
    
    
    
    
    
    37,941Stockholders deficit
    
    
    (5,625
    )
    
    
    (93,386
    )
    
    
    (9,484
    )
    
    
    (67,039
    )
    
    
    (11,752
    )
    
    
    (60,858
    )
 38




---



##### Table of Contents



As of or for the year endedDecember 31, 2004As reported
    
    
    As restatedStatement of Operations:Net revenue
    
    $
    102,051
    
    
    $
    102,051Gross Profit
    
    
    25,054
    
    
    
    25,054Loss from operations
    
    
    (7,973
    )
    
    
    (7,973
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    35,074Other financing costs
    
    
    
    
    
    
    (1,330
    )Net earnings (loss)
    
    
    (9,914
    )
    
    
    23,830Deemed dividends  issuance of Series AA
and amortization of related discount
    
    
    
    
    
    
    (45,404
    )Net loss available to common shareholders
    
    
    (14,139
    )
    
    
    (25,799
    )Basic and diluted loss per share
    
    
    (1.34
    )
    
    
    (2.44
    )Balance Sheet:Current assets
    
    $
    29,093
    
    
    $
    29,093Current liabilities
    
    
    26,105
    
    
    
    26,105Notes payable, less current portion
    
    
    9,183
    
    
    
    9,183Derivative financial instruments, at
estimated fair value
    
    
    
    
    
    
    11,165Deferred revenue and other non-current
liabilities
    
    
    16,443
    
    
    
    16,443Series AA convertible preferred stock, net
    
    
    
    
    
    
    37,941Stockholders deficit
    
    
    (11,752
    )
    
    
    (60,858
    )
 As of or for the three months endedMarch
31,
2005

    June 30, 2005
    September 30, 2005As
    
    
    As
    
    
    As
    
    
    As
    
    
    As
    
    
    Asreported
    
    
    restated
    
    
    reported
    
    
    restated
    
    
    reported
    
    
    restatedStatement of Operations:Net revenue
    
    $
    24,623
    
    
    $
    24,623
    
    
    $
    23,776
    
    
    $
    23,776
    
    
    $
    21,306
    
    
    $
    21,306Gross Profit
    
    
    7,168
    
    
    
    7,168
    
    
    
    7,068
    
    
    
    7,068
    
    
    
    5,822
    
    
    
    5,822Loss from operations
    
    
    (785
    )
    
    
    (785
    )
    
    
    (889
    )
    
    
    (889
    )
    
    
    (2,049
    )
    
    
    (2,049
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    5,099
    
    
    
    
    
    
    
    (4,311
    )
    
    
    
    
    
    
    (25,972
    )Net earnings (loss)
    
    
    (931
    )
    
    
    4,168
    
    
    
    (2,207
    )
    
    
    (6,517
    )
    
    
    (2,296
    )
    
    
    (28,268
    )Deemed dividends  amortization of
discount of Series AA
    
    
    
    
    
    
    (217
    )
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (257
    )Net earnings
(loss) available to common shareholders
    
    
    (931
    )
    
    
    3,951
    
    
    
    (2,207
    )
    
    
    (6,754
    )
    
    
    (2,296
    )
    
    
    (28,525
    )Basic earnings (loss) per share
    
    
    (0.08
    )
    
    
    0.35
    
    
    
    (0.19
    )
    
    
    (0.59
    )
    
    
    (0.20
    )
    
    
    (2.44
    )Diluted loss per share
    
    
    (0.08
    )
    
    
    (0.06
    )
    
    
    (0.19
    )
    
    
    (0.59
    )
    
    
    (0.20
    )
    
    
    (2.44
    )Balance Sheet:Current assets
    
    $
    28,970
    
    
    $
    28,970
    
    
    $
    26,638
    
    
    $
    26,638
    
    
    $
    22,546
    
    
    $
    22,546Current liabilities
    
    
    29,047
    
    
    
    29,047
    
    
    
    30,843
    
    
    
    30,843
    
    
    
    30,651
    
    
    
    30,651Notes payable, less current portion
    
    
    7,410
    
    
    
    7,410
    
    
    
    6,078
    
    
    
    6,078
    
    
    
    4,827
    
    
    
    4,827Derivative financial instruments,
at estimated fair value
    
    
    
    
    
    
    6,066
    
    
    
    
    
    
    
    10,377
    
    
    
    
    
    
    
    36,349Deferred revenue and other
non-current liabilities
    
    
    16,059
    
    
    
    16,059
    
    
    
    15,510
    
    
    
    15,510
    
    
    
    15,039
    
    
    
    15,039Series AA convertible preferred
stock, net
    
    
    
    
    
    
    38,158
    
    
    
    
    
    
    
    38,395
    
    
    
    
    
    
    
    38,652Stockholders deficit
    
    
    (12,644
    )
    
    
    (56,868
    )
    
    
    (14,794
    )
    
    
    (63,566
    )
    
    
    (17,045
    )
    
    
    (92,046
    )
 39




---



##### Table of Contents



Liquidity And Capital Resources
 Liquidity
Issues
    
    
    Obtaining additional capital from debt or equity fund raising activities;
    
    Strategic alliance or business combination and related funding from such
a relationship;
    
    Continued restructuring of current operations to decrease operating
costs and improve gross margins;
    
    Sale of all or a portion of operations or technology rights; or
    
    Restructuring of notes payable and trade payables to certain suppliers
to provide for extended payment periods.
  Cash
Flows  2005
  40




---



##### Table of Contents



Cash
Flows  2004
   Cash
Flows  2003
   41




---



##### Table of Contents



Borrowings and Preferred Stock
 Convertible Subordinated Notes
   Line of Credit-Wells Fargo Business Credit, Inc.
  Line of Credit-Silicon Valley Bank
  42




---



##### Table of Contents



Notes Payable  Suppliers
  Note Payable  Lessor
  Series AA Preferred Stock
  Media Distribution Agreement
   43




---



##### Table of Contents



Non-Current Liabilities And Contractual Obligations
  1 - 3(In thousands)
    
    Less than 1 year
    
    
    years
    
    
    After 3 years
    
    
    TotalNotes payable
    
    $
    8,112
    
    
    $
    8,898
    
    
    $
    319
    
    
    $
    17,329Operating leases
    
    
    903
    
    
    
    2,591
    
    
    
    439
    
    
    
    3,933Capital lease obligations
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21$
    9,036
    
    
    $
    11,489
    
    
    $
    758
    
    
    $
    21,283
   
 ITEM 7A.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
  Foreign Currency Exchange Rates
   44




---



##### Table of Contents



Interest Rates
   
 ITEM 8.
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
 ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
 CONTROLS AND PROCEDURES
    45




---



##### Table of Contents



46




---



##### Table of Contents



ITEM 9B.
 OTHER INFORMATION
  47




---



##### Table of Contents



PART III
 
 ITEM 10.
 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  DIRECTORS
 A. Laurence Jones
  G. Jackson Tankersley, Jr.
  John R. Garrett
  Thomas E. Pardun
  48




---



##### Table of Contents



Leonard W. Busse
  Stephanie Smeltzer McCoy
  Mr. Ward and Mr. Rodriguez are also directors and information regarding each of them is
provided below under Officers.
 OFFICERS
 Tom W. Ward
  Juan A. Rodriguez
  49




---



##### Table of Contents



Carroll A. Wallace
    AUDIT COMMITTEE
  SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
    50




---



##### Table of Contents



ITEM 11.
 EXECUTIVE
COMPENSATION, COMPENSATION COMMITTEE REPORT
 Compensation Committee Policies
  
    
    base salary;
    
    incentive bonus awards; and
    
    stock option awards (long-term compensation).
     
    
    financial performance;
    
    stock performance;
    
    long-term strategic decisions; and
    
    response to a rapidly changing competitive environment.
  51




---



##### Table of Contents



Chief Executive Officer Compensation
   Deductibility of Compensation
  Compensation Committee:
 Thomas E. Pardun, ChairmanJohn R. Garrett
    
    
    
    Leonard W. BusseStephanie Smeltzer McCoy
    
    
    
    A. Laurence Jones
 COMPENSATION COMMITTEE INTERLOCKS
  COMPENSATION OF DIRECTORS
   52




---



##### Table of Contents



SUMMARY OF COMPENSATION
  Summary Compensation Table
 Long-TermCompensationAnnual Compensation
    
    AwardsSecurities
    
    All OtherSalary
    
    Bonus
    
    Underlying
    
    CompensationName and Principal Position

    Year

    ($)(1)

    ($)(2)

    Options(#)(3)

    ($)(4)(5)Tom W. Ward(6)
    
    
    2005
    
    
    
    300,000
    
    
    
    
    
    
    2,250,000
    
    
    
    810President and Chief Executive
    
    
    2004
    
    
    
    300,000
    
    
    
    145,500
    (2)
    
    
    3,750
    
    
    
    810Officer
    
    
    2003
    
    
    
    300,000
    
    
    
    225,000
    (2)
    
    
    700,000
    
    
    
    810Juan A. Rodriguez(7)
    
    
    2005
    
    
    
    225,014
    
    
    
    
    
    
    600,000
    
    
    
    3,176Chairman of the Board and
    
    
    2004
    
    
    
    225,014
    
    
    
    98,000
    (2)
    
    
    152,500
    
    
    
    3,176Chief Technologist
    
    
    2003
    
    
    
    225,014
    
    
    
    50,000
    (2)
    
    
    94,000
    
    
    
    3,176Carroll A. Wallace(8)
    
    
    2005
    
    
    
    200,000
    
    
    
    
    
    
    540,000
    
    
    
    1,805Chief Financial Officer
    
    
    2004
    
    
    
    200,000
    
    
    
    98,000
    (2)
    
    
    152,500
    
    
    
    1,8052003
    
    
    
    15,384
    
    
    
    50,000
    (2)
    
    
    40,000
    
    
    
    74
 
 (1)
    
    Includes amounts earned but deferred at the election of the Named Executive Officers under
the 401(k) plan.(2)
    
    2003 bonus amountsinclude the value of 745,214 shares issued to Mr. Ward,
52,631 shares issued to Mr. Rodriguez, and 52,631 shares issued to Mr. Wallace for bonuses
earned in 2003.2004 bonus amountsinclude the value of 161,378 shares issued to Mr. Ward, 65,210 shares
issued to Mr. Rodriguez, and 65,210 shares issued to Mr. Wallace for bonuses earned in 2004.(3)
    
    We have not granted any SARs or restricted stock awards.(4)
    
    As permitted by SEC rules, we have not shown amounts for certain perquisites where the amounts do not
exceed the lesser of 10% of bonus plus salary or $50,000.(5)
    
    2005 compensationincludes the dollar value of executive life insurance
premiums paid by Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward,
$810; Mr. Rodriguez, $3,176; and Mr. Wallace, $1,805.2004 compensationincludes the dollar value of executive life insurance premiums paid by
Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward, $810; Mr.
Rodriguez, $3,176; and Mr. Wallace, $1,805.2003 compensationincludes the dollar value of executive life insurance premiums paid by
Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward, $810; Mr.
Rodriguez, $3,176; and Mr. Wallace, $74.(6)
    
    Mr. Tom Ward was hired and appointed President and Chief Executive Officer on June 3, 2002.(7)
    
    Mr. Rodriguez was appointed Interim Chief Executive Officer and President on January 20, 2002. He served
in this position until June 2002, at which time he was appointed Chairman of the Board and Chief
Technologist.(8)
    
    Mr. Wallace was appointed Chief Financial Officer of Exabyte on November 1, 2003. 53




---



##### Table of Contents



Employment Agreement
  Incentive Stock Plan
   2004 Exabyte Corporation Employee Stock Option Plan
   2005 Exabyte Corporation Employee Stock Option Plan
   54




---



##### Table of Contents



STOCK OPTION GRANTS
  Option Grants In Last Fiscal Year
 Individual GrantsNumber of
    
    % of Total
    
    
    
    
    
    
    
    
    
    Potential RealizableSecurities
    
    Options
    
    
    
    
    
    
    
    
    
    Value at Assumed AnnualUnderlying
    
    Granted to
    
    
    
    
    
    
    
    
    
    Rates of Stock PriceOptions
    
    Employees in
    
    Exercise
    
    Expiration
    
    Appreciation for OptionName
    
    Granted (#)
    
    Fiscal Year(3)
    
    Price ($/SH)
    
    Date
    
    Term(4)5% ($)
    
    
    
    10% ($)Tom W. Ward
    
    
    2,250,000
    (2)
    
    
    35.55
    %
    
    $
    1.15
    
    
    
    12/1/2015
    
    
    $
    1,627,828
    
    
    $
    4,125,561Juan A. Rodriguez
    
    
    600,000
    (2)
    
    
    9.48
    %
    
    $
    1.15
    
    
    
    12/1/2015
    
    
    $
    433,937
    
    
    $
    1,099,682Carroll A. Wallace
    
    
    40,000
    (1)
    
    
    0.63
    %
    
    $
    2.00
    
    
    
    9/10/2015
    
    
    $
    50,312
    
    
    $
    127,499500,000
    (2)
    
    
    7.90
    %
    
    $
    1.15
    
    
    
    12/1/2015
    
    
    $
    361,614
    
    
    $
    916,402
 
 (1)
    
    Options under the 2004 Plan generally vest at the rate of 2% of the total grant per month,
beginning one month from the date of grant, for a period of 50 months. Options may only be
non-statutory options. The exercise price of options granted under the 2004 Plan must be at
least equal to the fair market value of the common stock on the date of grant. In accordance
with the option agreements issued under the 2004 Plan, options granted to certain executive
officers and other members of management pursuant to the 2004 Plan will fully vest upon a
change in control. Pursuant to the Companys bylaws, the Board may not reprice options granted
under any of its option plans without approval of the stockholders by a majority vote.(2)
    
    Options under the 2005 Plan generally vest at the rate of 2% of the total grant per month,
beginning one month from the date of grant, for a period of 50 months. Options granted under
the 2005 Plan on December 1, 2005 were approximately 82% vested on that date, with the
remainder vesting ratably over 50 months. Options may only be non-statutory options. The
exercise price of options granted under the 2005 Plan must be at least equal to the fair
market value of the common stock on the date of grant. In accordance with the option
agreements issued under the 2005 Plan, options granted to certain executive officers and other
members of management pursuant to the 2005 Plan will fully vest upon a change in control.
Pursuant to the Companys bylaws, the Board may not reprice options granted under any of its
option plans without approval of the stockholders by a majority vote.(3)
    
    Based on options granted to Company employees during fiscal 2005 to purchase 6,330,000
shares.(4)
    
    The potential realizable value is based on the term of the option at the date of grant (10
years in each case). It is calculated by assuming that the stock price on the date of grant
appreciates at the indicated annual rate, compounded annually for the entire term, and that
the option is exercised and sold on the last day of the option term for the appreciated stock
price. These amounts represent certain assumed rates of appreciation only, in accordance with
SEC rules, and do not reflect our estimate or projection of future stock price performance.
Actual gains, if any, are dependent on the actual future performance of the Companys common
stock. The amounts reflected in this table may never be achieved. 55




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##### Table of Contents



Option Exercises And Year-End Holdings
  Number of Securities
    
    Value of UnexercisedShares
    
    
    
    
    
    Underlying Unexercised
    
    In-the-Money OptionsAcquired
    
    Value
    
    Options at FY-End
    
    at FY-Endon Exercise
    
    Realized
    
    (#)(1)
    
    ($)(2)Name
    
    (#)
    
    ($)
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableTom W. Ward
    
    
    0
    
    
    
    0
    
    
    
    2,940,750
    
    
    
    713,000
    
    
    
    0
    
    
    
    0Juan A. Rodriguez
    
    
    0
    
    
    
    0
    
    
    
    772,140
    
    
    
    148,360
    
    
    
    0
    
    
    
    0Carroll A. Wallace
    
    
    0
    
    
    
    0
    
    
    
    604,900
    
    
    
    127,600
    
    
    
    0
    
    
    
    0
 
 (1)
    
    Includes both in-the-money and out-of-the-money options. In-the-money options are
options with exercise prices below the market price of the Companys common stock (as noted)
on December 31, 2005.(2)
    
    Fair market value of the Companys common stock on December 31, 2005, the last trading day of
fiscal 2005 ($0.90, based on the closing sales price reported on the Over the Counter Bulletin
Board) less the exercise price of the option. 56




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##### Table of Contents



PERFORMANCE GRAPH(1)
  
 
 (1)
    
    The material in this chart is not soliciting material, is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of Exabyte under the Securities Act
or the Exchange Act, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing. 57




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##### Table of Contents



ITEM 12.
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
    
    each director;
    
    each current executive officer named in the Summary Compensation Table;
    
    all of Exabytes directors and the named Executive Officers as a group; and
    
    all those known to be beneficial owners of more than five percent of Exabytes common stock.
 Beneficial Ownership(1)Percent ofBeneficial Owner
    
    Number of Shares
    
    Percent of Total
    
    Outstanding VotesMeritage Investment Partners LLC(2)
    
    
    19,142,232
    
    
    
    69.88
    %
    
    
    41.01
    %1600 WynkoopSuite 300Denver, CO 80202Imation Corp.(7)
    
    
    4,041,912
    
    
    
    24.61
    %
    
    
    11.48
    %1 Imation PlaceOakdale, MN 55128Crestview Capital Master, LLC(8)
    
    
    1,455,366
    
    
    
    9.45
    %
    
    
    *Northbrook, IL 60062Juan A. Rodriguez(3)
    
    
    837,895
    
    
    
    5.67
    %
    
    
    *Tom W. Ward(3)(5)
    
    
    5,417,796
    
    
    
    29.04
    %
    
    
    5.38
    %Leonard W. Busse(3)
    
    
    76,131
    
    
    
    *
    
    
    
    *John R. Garrett(3)
    
    
    70,595
    
    
    
    *
    
    
    
    *A. Laurence Jones(3)
    
    
    100,372
    
    
    
    *
    
    
    
    *Stephanie Smeltzer McCoy(3)
    
    
    88,277
    
    
    
    *
    
    
    
    *Thomas E. Pardun(3)
    
    
    81,601
    
    
    
    *
    
    
    
    *G. Jackson Tankersley, Jr.(3)(4)
    
    
    19,558,117
    
    
    
    70.49
    %
    
    
    41.46
    %Carroll A. Wallace(3)
    
    
    627,084
    
    
    
    *
    
    
    
    *Executive Officers and Directors as a group
(9 persons)(6)
    
    
    26,857,868
    
    
    
    84.23
    %
    
    
    48.17
    %
 
 *
    
    Less than one percent.(1)
    
    This table is based upon information supplied by officers, directors and principal stockholders
and by Schedules 13D and 13G, if any, filed with the SEC. Subject to footnotes below and
community property laws, where applicable, each of the stockholders named has sole power to vote
and dispose of the shares indicated as beneficially owned. As required by Rule 13d-3(d), each of
the names indicated in the table are deemed to be the beneficial owner of shares that the person
has the right to acquire beneficial ownership of within 60 days of March 1, 2006.Applicable percentages are based on 13,988,458 shares outstanding on March 1, 2006, adjusted as
required by Rule 13d-3(d)(1).(2)
    
    This information is based on a Schedule 13D, dated November 1, 2005, filed with the SEC and
subsequent information separately provided by Meritage Private Equity Fund, L.P. (Meritage
Fund), private equity investment fund, and Meritage Investment Partners, LLC (Meritage
Investment), a manager of private equity investment funds and the sole general partner of
Meritage Fund.Includes shares directly beneficially owned by Meritage Fund as follows: 5,031,389 shares of
common stock, 7,630,859 shares of Series AA Preferred stock (as-converted), 1,948,333 shares
related to the conversion of 10% Convertible Subordinated Notes Payable and 2,174,334 shares of
common stock issuable upon the exercise of warrants.Also includes shares owned indirectly beneficially by Meritage Investment through two other
funds in which it is the sole general partner as follows: 705,578 shares of common stock,
1,072,219 shares of Series AA Preferred stock (as-converted), 273,889 shares related to the
conversion of 10% Convertible Subordinated Notes Payable and 305,631 shares of common stock
issuable upon the exercise of warrants. 58




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##### Table of Contents



Meritage Fund is shown to have sole voting and dispositive power over 16,784,915 shares,
representing 67.04% of the common stock. Meritage Investment is shown to have sole voting and
dispositive power over all of the shares.(3)
    
    Includes shares issuable upon the exercise of outstanding stock options that are exercisable
within 60 days of March 1, 2006, as follows: Mr. Rodriguez, 788,300 shares; Mr. Ward, 3,029,150
shares; Mr. Busse, 54,818 shares; Mr. Garrett, 70,595; Mr. Jones, 73,318 shares; Ms. McCoy,
53,318 shares; Mr. Pardun, 58,318 shares; Mr. Tankersley, 54,318 shares; and Mr. Wallace,
615,300 shares.(4)
    
    Includes the shares listed for Meritage Investment Partners LLC under footnote 2, as to which
Mr. Tankersley has voting and dispositive power by virtue of being a managing member of Meritage
Investment Partners, LLC. Mr. Tankersley disclaims beneficial ownership of such shares. Also
includes the following shares held by the following entities: Millennial Holdings LLC, 16,485
shares of common stock; 156,236 shares of Series AA preferred stock (as-converted) and 8,436
shares of common stock issuable upon the exercise of warrants; The Millennial Fund, 6,081 shares
of common stock; 56,290 shares of Series AA preferred stock (as-converted) and 3,039 shares of
common stock issuable upon the exercise of warrants; and Tankersley Family Limited Partnership,
8,257 shares of common stock, 70,842 shares of Series AA preferred stock (as-converted) and
3,825 shares of common stock issuable upon the exercise of warrants. Mr. Tankersley is the
managing member of Millennial Holdings LLC and sole general partner of Tankersley Family Limited
Partnership and may be deemed to posses voting and dispositive power over shares held by such
entities. Mr. Tankersley disclaims beneficial ownership of all such shares. The Millennial Fund
is not a separate legal entity and Mr. Tankersley is the direct beneficial owner of all shares
held in that name.(5)
    
    Includes 1,636,509 shares of Series AA preferred stock (as converted) owned directly by Mr. Ward.(6)
    
    Includes shares described in the notes above, as applicable.(7)
    
    Includes shares directly beneficially owned by Imation Corp. as follows: 1,605,623 shares of
common stock, 1,599,895 shares of Series AA Preferred stock (as-converted) and 836,394 shares of
common stock issuable upon the exercise of warrants.(8)
    
    Includes shares directly beneficially owned by Crestview Capital Master, LLC as follows: 49,256
shares of common stock, 833,333 shares of Series AA Preferred stock (as-converted), 277,777
shares related to the conversion of 10% Convertible Subordinated Notes Payable and 295,000
shares of common stock issuable upon the exercise of warrants.(9)
    
    Percentage of total voting power is based on votes of shares actually outstanding and owned by
the stockholder and the total votes of outstanding shares as of March 1, 2006. Series AA
Preferred stock is non-voting stock. 59




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##### Table of Contents



ITEM 13.
 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 ITEM 14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit Fees
 Audit-Related Fees
 Tax Fees
 All Other Fees
  Fee Detail
 FEE CATEGORY
    
    2005
    
    2004Audit Fees
    
    $
    142,000
    
    
    $
    142,000Audit-Related Fees
    
    $
    0
    
    
    $
    0Tax Fees
    
    $
    28,000
    
    
    $
    26,500All Other Fees
    
    $
    13,000
    
    
    $
    9,000
 60




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##### Table of Contents



PART IV
 
 ITEM 15.
 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES,
 (a) 1. Consolidated Financial Statements
 PageReports of Independent Registered Public Accounting Firms
    
    F-1Consolidated Balance Sheets December 31, 2004 and 2005
    
    F-3Consolidated Statements of Operations  Years ended January 3, 2004
and December 31, 2004 and 2005
    
    F-5Consolidated Statements of Stockholders Equity (Deficit)  Years
ended January 3, 2004 and December 31, 2004 and 2005
    
    F-6Consolidated Statements of Cash Flows  Years ended January 3, 2004
and December 31, 2004 and 2005
    
    F-8Notes to Consolidated Financial Statements
    
    F-10
 (a) 2. Consolidated Financial Statement Schedules
  II
    
    Valuation and Qualifying Accounts
    
    S-1
  61




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      /s/  Ehrhardt Keefe Steiner & Hottman PCEhrhardt Keefe Steiner & Hottman PCMarch 8, 2006Denver, Colorado
 F - 1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
   /s/ PricewaterhouseCoopers LLPPricewaterhouseCoopers LLPDenver, ColoradoMarch 30, 2004, except as to the reversestock split described in Note 1, whichis as of December 2, 2005
 F - 2




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##### Table of Contents



December 31,
    
    
    December 31,2004
    
    
    2005(In thousands, except per share data)
    
    (As restated, see Note 8)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    444
    
    
    $
    430Accounts receivable, less allowances for uncollectible
accounts and sales returns and programs of $1,910 and
$2,382, respectively
    
    
    13,929
    
    
    
    14,171Inventory, net
    
    
    12,398
    
    
    
    7,765Other
    
    
    2,322
    
    
    
    1,488Total current assets
    
    
    29,093
    
    
    
    23,854Equipment, product tooling and leasehold improvements, net
(Note 2)
    
    
    2,601
    
    
    
    2,720Goodwill
    
    
    7,428
    
    
    
    7,428Other non-current assets
    
    
    857
    
    
    
    713Total non-current assets
    
    
    10,886
    
    
    
    10,861Total assets
    
    $
    39,979
    
    
    $
    34,715LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    7,766
    
    
    $
    5,149Accrued liabilities (Note 3)
    
    
    5,017
    
    
    
    6,712Current portion of deferred revenue (Note 11)
    
    
    3,460
    
    
    
    2,001Line of credit  Bank (Note 4)
    
    
    6,173
    
    
    
    3,652Current portion of notes payable  suppliers (Note 4)
    
    
    3,201
    
    
    
    5,131Note payable to customer (Note 11)
    
    
    
    
    
    
    2,000Current portion of other liabilities
    
    
    488
    
    
    
    251Total current liabilities
    
    
    26,105
    
    
    
    24,896Convertible Subordinated Notes, net (Note 4)
    
    
    
    
    
    
    318Derivative financial instruments, at estimated fair value (Note 7)
    
    
    11,165
    
    
    
    27,060Notes payable, less current portion (Notes 4 and 11):Suppliers
    
    
    6,210
    
    
    
    888Customer
    
    
    
    
    
    
    5,000Others
    
    
    2,973
    
    
    
    3,0109,183
    
    
    
    8,898Deferred revenue, less current portion (Note 11)
    
    
    15,025
    
    
    
    4,211Accrued warranties, less current portion
    
    
    845
    
    
    
    1,012Other liabilities, less current portion
    
    
    573
    
    
    
    280Total liabilities
    
    $
    62,896
    
    
    $
    66,675
  F - 3




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS (CONTINUED)
 December 31,
    
    
    December 31,2004
    
    
    2005(In thousands, except per share data)
    
    (As restated, see Note 8)Series AA Convertible preferred stock, net of
discount. Stated and liquidation value of $45,000; 55
shares authorized, 45 shares outstanding (Note 6)
    
    $
    37,941
    
    
    $
    38,931Stockholders deficit (Notes 5 and 6):Preferred stock; no series; $.001 par value; 18,350
shares authorized; no shares issued and outstanding
    
    $
    
    
    
    $
    Preferred stock; series A; $.001 par value; 500
shares authorized; no shares issued and outstanding
    
    
    
    
    
    
    Series G convertible preferred stock; $.001 par
value; 1,500 shares authorized; no shares issued
and outstanding
    
    
    
    
    
    
    Series H convertible preferred stock; $.001 par
value; 9,650 shares authorized; no shares issued
and outstanding
    
    
    
    
    
    
    Series I convertible preferred stock; $.001 par
value; 10,000 shares authorized; no shares issued
and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; 350,000 shares
authorized; 11,196 and 13,963 shares outstanding,
respectively
    
    
    11
    
    
    
    14Additional paid-in capital
    
    
    51,508
    
    
    
    53,542Treasury stock, at cost; 10 shares
    
    
    (578
    )
    
    
    (578
    )Accumulated deficit
    
    
    (111,799
    )
    
    
    (123,869
    )Total stockholders deficit
    
    
    (60,858
    )
    
    
    (70,891
    )Commitments and contingencies (Note 12)Total liabilities and stockholders deficit
    
    $
    39,979
    
    
    $
    34,715
  F - 4




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS
 Fiscal Years EndedJanuary 3,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2004
    
    
    2005(In thousands, except per share data)
    
    (As restated, see Note 8)Net revenue
    
    $
    94,169
    
    
    $
    102,051
    
    
    $
    90,968Cost of goods sold
    
    
    78,576
    
    
    
    76,997
    
    
    
    65,395Gross profit
    
    
    15,593
    
    
    
    25,054
    
    
    
    25,573Operating expenses:Selling, general and administrative
    
    
    30,084
    
    
    
    23,783
    
    
    
    20,913Engineering, research and development
    
    
    9,826
    
    
    
    9,244
    
    
    
    9,395Lease terminations and related costs (Note 13)
    
    
    4,707
    
    
    
    
    
    
    
    Total operating expenses
    
    
    44,617
    
    
    
    33,027
    
    
    
    30,308Loss from operations
    
    
    (29,024
    )
    
    
    (7,973
    )
    
    
    (4,735
    )Other income (expense):Interest expense (Note 4):Stock-based
    
    
    (10,146
    )
    
    
    (88
    )
    
    
    (163
    )Amortization of debt discount
    
    
    
    
    
    
    
    
    
    
    (318
    )Other
    
    
    (2,713
    )
    
    
    (1,493
    )
    
    
    (1,479
    )Total interest expense
    
    
    (12,859
    )
    
    
    (1,581
    )
    
    
    (1,960
    )Change in estimated fair value of derivative
financial instruments (Note 7)
    
    
    
    
    
    
    35,074
    
    
    
    (3,807
    )Other financing costs (Note 4)
    
    
    
    
    
    
    (1,330
    )
    
    
    (1,964
    )Gain (loss) on foreign currency translation
    
    
    (1,851
    )
    
    
    (105
    )
    
    
    793Litigation settlements, net (Note 12)
    
    
    
    
    
    
    
    
    
    
    75Other, net
    
    
    130
    
    
    
    (208
    )
    
    
    (312
    )Total other income (expense)
    
    
    (14,580
    )
    
    
    31,850
    
    
    
    (7,175
    )Earnings (loss) before income taxes
    
    
    (43,604
    )
    
    
    23,877
    
    
    
    (11,910
    )Income tax expense (Note 9)
    
    
    (88
    )
    
    
    (47
    )
    
    
    (160
    )Net earnings (loss)
    
    
    (43,692
    )
    
    
    23,830
    
    
    
    (12,070
    )Deemed dividends (Notes 6 and 7):Beneficial conversion of preferred stock
    
    
    (556
    )
    
    
    
    
    
    
    Exchange of preferred stock
    
    
    
    
    
    
    (4,225
    )
    
    
    Issuance of Series AA convertible
preferred stock and amortization of
related discount
    
    
    
    
    
    
    (45,404
    )
    
    
    (990
    )Net loss available to common stockholders
    
    $
    (44,248
    )
    
    $
    (25,799
    )
    
    $
    (13,060
    )Basic and diluted loss per share
    
    $
    (6.96
    )
    
    $
    (2.44
    )
    
    $
    (1.10
    )Weighted average common shares used in
calculation of basic and diluted loss per share
    
    
    6,362
    
    
    
    10,583
    
    
    
    11,912
  F - 5




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Preferred Stock
    
    Common Stock
    
    Additional
    
    
    
    
    
    
    
    
    
    TotalSeries
    
    Series
    
    Series
    
    
    
    
    
    
    
    
    
    Paid-In
    
    Treasury
    
    Accumulated
    
    Stockholders(In thousands, except per share data)
    
    G
    
    H
    
    I
    
    Shares
    
    Amount
    
    Capital
    
    Stock
    
    Deficit
    
    Equity (Deficit)Balances at December 29, 2002
    
    
    1
    
    
    
    10
    
    
    
    8
    
    
    
    3,361
    
    
    
    3
    
    
    
    98,507
    
    
    
    (2,060
    )
    
    
    (91,937
    )
    
    
    4,532Common stock options exercised at $1.80 and $7.40 per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Common stock issued pursuant to employee stock
purchase plan at $0.80 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Issuance of 1,500 shares of Series I preferred stock at
$1.00 per share (Note 9)
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,499
    
    
    
    
    
    
    
    
    
    
    
    1,500Issuance of common stock warrants (Note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    71Common stock issued under loan guaranties (Note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,004
    
    
    
    5
    
    
    
    8,439
    
    
    
    
    
    
    
    
    
    
    
    8,444Common stock issued for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    (1,151
    )
    
    
    1,482
    
    
    
    
    
    
    
    331Common stock issued for settlement of accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    383Common stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of preferred stock to common stock
    
    
    (1
    )
    
    
    (3
    )
    
    
    
    
    
    
    591
    
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,692
    )
    
    
    (43,692
    )Balances at January 3, 2004
    
    $
    
    
    
    $
    7
    
    
    $
    9
    
    
    
    9,302
    
    
    $
    9
    
    
    $
    107,766
    
    
    $
    (578
    )
    
    $
    (135,629
    )
    
    $
    (28,416
    )Common stock options exercised at prices ranging from
$1.50 to $10.50 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    179Common stock issued pursuant to employee stock
purchase plan at $3.50 and $7.50 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Conversion of preferred stock to common stock
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )
    
    
    695
    
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued upon exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange of preferred stock to Series AA preferred
stock
and reclassification
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (13,825
    )
    
    
    
    
    
    
    
    
    
    
    (13,837
    )Issuance of common stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88Common stock issued under loan guaranties (Note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    1
    
    
    
    1,630
    
    
    
    
    
    
    
    
    
    
    
    1,631Common stock issued for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    
    
    
    
    1,048
    
    
    
    
    
    
    
    
    
    
    
    1,048Common stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deemed
dividend to record Series AA at stated liquidation
value
(Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,909
    )
    
    
    
    
    
    
    
    
    
    
    (44,909
    )Amortization of discount on Series AA preferred stock
(Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (495
    )
    
    
    
    
    
    
    
    
    
    
    (495
    )Net earnings for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,830
    
    
    
    23,830Balances at December 31, 2004 (As restated, see Note 8)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    11,196
    
    
    $
    11
    
    
    $
    51,508
    
    
    $
    (578
    )
    
    $
    (111,799
    )
    
    $
    (60,858
    )
  F-6




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)(CONTINUED)
 Preferred Stock
    
    Common Stock
    
    Additional
    
    
    
    
    
    
    
    
    
    TotalSeries
    
    Series
    
    Series
    
    
    
    
    
    
    
    
    
    Paid-In
    
    Treasury
    
    Accumulated
    
    Stockholders(In thousands, except per share data)
    
    G
    
    H
    
    I
    
    Shares
    
    Amount
    
    Capital
    
    Stock
    
    Deficit
    
    Equity (Deficit)Balances at December 31, 2004 (As restated, see
Note 8)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    11,196
    
    
    $
    11
    
    
    $
    51,508
    
    
    $
    (578
    )
    
    $
    (111,799
    )
    
    $
    (60,858
    )Common stock options exercised at $1.81 and $4.50 per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    369Common stock issued pursuant to employee stock
purchase plan at $2.13 and $0.77 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Common stock issued in connection with
modification of media distribution agreement
(Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500
    
    
    
    2
    
    
    
    2,848
    
    
    
    
    
    
    
    
    
    
    
    2,850Common stock issued for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    130Common stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,186
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of discount on Series AA preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (990
    )
    
    
    
    
    
    
    
    
    
    
    (990
    )Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,070
    )
    
    
    (12,070
    )Balances at December 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    13,963
    
    
    $
    14
    
    
    $
    53,542
    
    
    $
    (578
    )
    
    $
    (123,869
    )
    
    $
    (70,891
    )
  F-7




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Years EndedJanuary 3,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2004
    
    
    2005(In thousands)
    
    
    
    
    (As restated, see Note 8)Cash flows from operating activities:Net earnings (loss)
    
    $
    (43,692
    )
    
    $
    23,830
    
    
    $
    (12,070
    )Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operating
activities:Depreciation and amortization
    
    
    3,688
    
    
    
    1,772
    
    
    
    1,403Provision for uncollectible accounts
receivable and sales returns and
programs
    
    
    5,301
    
    
    
    208
    
    
    
    700Provision for excess and obsolete inventory
    
    
    9,814
    
    
    
    1,150
    
    
    
    1,600Lease terminations and related costs
    
    
    4,707
    
    
    
    
    
    
    
    Provision for settlement of litigation
    
    
    
    
    
    
    
    
    
    
    1,125Stock-based compensation expense
    
    
    331
    
    
    
    854
    
    
    
    130Stock-based interest expense
    
    
    10,146
    
    
    
    88
    
    
    
    163Amortization of deferred revenue related to
media distribution agreement
    
    
    (154
    )
    
    
    (1,850
    )
    
    
    (1,850
    )Amortization of debt discount
    
    
    
    
    
    
    
    
    
    
    318Change in estimated fair value of
derivative
financial instruments
    
    
    
    
    
    
    (35,074
    )
    
    
    3,807Other non-cash financing costs
    
    
    
    
    
    
    1,330
    
    
    
    1,964Loss (gain) on disposal of equipment and
leasehold improvements
    
    
    (124
    )
    
    
    169
    
    
    
    Loss (gain) on foreign currency
translation of
non-current liability
    
    
    1,634
    
    
    
    (81
    )
    
    
    (781
    )Changes in assets and liabilities:Accounts receivable, net
    
    
    11,808
    
    
    
    627
    
    
    
    (942
    )Inventory, net
    
    
    2,683
    
    
    
    (1,463
    )
    
    
    3,033Other current assets
    
    
    74
    
    
    
    (546
    )
    
    
    834Other non-current assets
    
    
    488
    
    
    
    (542
    )
    
    
    144Accounts payable
    
    
    (452
    )
    
    
    (1,077
    )
    
    
    (2,617
    )Accrued liabilities
    
    
    (2,318
    )
    
    
    (2,595
    )
    
    
    (1,593
    )Deferred revenue
    
    
    18,416
    
    
    
    (140
    )
    
    
    1Other non-current liabilities
    
    
    908
    
    
    
    (17
    )
    
    
    (249
    )Net cash provided (used) by
operating activities
    
    
    23,258
    
    
    
    (13,357
    )
    
    
    (4,880
    )Cash flows from investing activities:Purchase of equipment, product tooling and
leasehold improvements
    
    
    (2,695
    )
    
    
    (1,761
    )
    
    
    (1,855
    )Proceeds from sale of equipment
    
    
    302
    
    
    
    
    
    
    
    Net cash used by investing activities
    
    
    (2,393
    )
    
    
    (1,761
    )
    
    
    (1,855
    )
  F-8




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 Fiscal YearsJanuary 3,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2004
    
    
    2005(In thousands)
    
    
    
    
    (As restated, see Note 8)Cash flows from financing activities:Proceeds from issuance of common and
preferred stock, net of offering
costs
    
    
    1,515
    
    
    
    23,811
    
    
    
    47Borrowings under line of credit  Bank
    
    
    113,987
    
    
    
    85,703
    
    
    
    103,411Payments under line of credit  Bank
    
    
    (126,050
    )
    
    
    (86,028
    )
    
    
    (105,932
    )Proceeds
from convertible subordinated notes
    
    
    
    
    
    
    
    
    
    
    9,550Proceeds from note payable to customer
    
    
    
    
    
    
    
    
    
    
    2,000Payments on notes payable and other
non-current liabilities
    
    
    (4,002
    )
    
    
    (14,903
    )
    
    
    (2,355
    )Net cash provided (used) by
financing
activities
    
    
    (14,550
    )
    
    
    8,583
    
    
    
    6,721Net increase (decrease) in cash and cash
equivalents
    
    
    6,315
    
    
    
    (6,535
    )
    
    
    (14
    )Cash and cash equivalents at beginning of
year
    
    
    664
    
    
    
    6,979
    
    
    
    444Cash and cash equivalents at end of year
    
    $
    6,979
    
    
    $
    444
    
    
    $
    430Supplemental disclosures of other cash and
non-cash investing and financing
activities:Interest paid in cash
    
    $
    (2,713
    )
    
    $
    (1,493
    )
    
    $
    (1,446
    )Common stock issued in satisfaction of
liability related to overadvance loan
guarantees
    
    
    
    
    
    
    1,631
    
    
    
    Common stock issued in satisfaction of
accrued bonuses
    
    
    
    
    
    
    330
    
    
    
    Conversion of accounts payable to notes
payable
    
    
    20,946
    
    
    
    
    
    
    
    Conversion of accrued liabilities to
notes
payable
    
    
    4,049
    
    
    
    
    
    
    
    Common stock issued in settlement of
accounts payable
    
    
    383
    
    
    
    
    
    
    
    Adjustment of fixed assets acquired
through note payable
    
    
    
    
    
    
    
    
    
    
    333Note payable, common stock and
warrants issued in connection with
modification of media distribution
agreement
    
    
    
    
    
    
    
    
    
    
    8,424
  F-9




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Operations and Summary of Significant Accounting Policies
 Business, Liquidity and Basis of Presentation
    F-10




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
    
    Obtaining additional capital from debt or equity fund raising activities;
    
    Strategic alliance or business combination and related funding from such relationship;
    
    Continued restructuring of current operations to decrease operating costs and improve
gross margins;
    
    Sale of all or a portion of operations or technology rights; or
    
    Restructuring of notes payable and trade payables to certain suppliers to provide for
extended payment terms.
   Cash and Cash Equivalents
  Reverse Stock Split
  Inventory
  December 31,
    
    
    December 31,(In thousands)
    
    2004
    
    
    2005Raw materials and component parts, net
    
    $
    5,068
    
    
    $
    3,301Finished goods
    
    
    7,330
    
    
    
    4,464$
    12,398
    
    
    $
    7,765
 Equipment, Product Tooling and Leasehold Improvements
  F-11




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fair Value of Financial Instruments
   Goodwill
  Revenue Recognition And Accounts Receivable
  F-12




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Foreign Currency Transactions and Remeasurement
  Comprehensive Income
  Liability For Warranty Costs
  (In thousands)
    
    2004
    
    
    2005Balance at beginning of year
    
    $
    2,024
    
    
    $
    1,583Accruals for warranties issued during the year
    
    
    882
    
    
    
    1,375Amortization during the year
    
    
    (1,323
    )
    
    
    (1,582
    )Balance at end of year
    
    $
    1,583
    
    
    $
    1,376
 Advertising Costs
  Engineering, Research and Development Costs
  F-13




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Loss Per Common Share
      Stock-Based Compensation
   F-14




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2003
    
    
    2004
    
    
    2005(As restated, see(In thousands, except per share data)
    
    
    
    
    
    Note 8)Net earnings (loss)
    
    $
    (43,692
    )
    
    $
    23,830
    
    
    $
    (12,070
    )Add stock-based compensation expense
included in reported net loss, net of
related tax effects
    
    
    331
    
    
    
    854
    
    
    
    130Deduct total stock-based compensation
expense determined under fair-value based
method for all awards, net of related tax
effects (1)
    
    
    (2,113
    )
    
    
    (6,354
    )
    
    
    (15,113
    )Pro forma net earnings (loss)
    
    $
    (45,474
    )
    
    $
    18,330
    
    
    $
    (27,053
    )Deemed dividends related to beneficial
conversion of preferred stock, exchange
of preferred stock and issuance of Series
AA preferred stock
    
    
    (556
    )
    
    
    (49,629
    )
    
    
    (990
    )Proforma net loss available to common
stockholders
    
    $
    (46,030
    )
    
    $
    (31,299
    )
    
    $
    (28,043
    )Basic and diluted net loss per share:As reported
    
    $
    (6.96
    )
    
    $
    (2.44
    )
    
    $
    (1.10
    )Pro forma
    
    $
    (7.24
    )
    
    $
    (2.96
    )
    
    $
    (2.35
    )
 
 (1)
    
    Pro forma compensation expense for 2005 includes $10,800,000 of additional expense related to
the acceleration of vesting of options, as discussed more fully in Note 5.  2003
    
    2004
    
    2005Estimated dividends
    
    None
    
    None
    
    NoneExpected volatility
    
    190%
    
    176%
    
    108%Risk-free interest rate
    
    1.5%-2.5%
    
    2.3%-3.3%
    
    3.4% - 4.4%Expected term (years)
    
    3.21
    
    3.08
    
    3.03
 Reclassifications
  F-15




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note
2  Equipment, Product Tooling and Leasehold Improvements
  2004
    
    
    2005(In thousands)Equipment and furniture
    
    $
    12,172
    
    
    $
    12,741Product tooling
    
    
    31,076
    
    
    
    14,295Leasehold improvements
    
    
    142
    
    
    
    142Less accumulated depreciation and amortization
    
    
    (40,789
    )
    
    
    (24,458
    )$
    2,601
    
    
    $
    2,720
  Note 3  Accrued Liabilities
  2004
    
    
    2005(In thousands)Compensation and benefits
    
    $
    1,671
    
    
    $
    1,395Current portion of warranty costs
    
    
    738
    
    
    
    364Deferred rent concessions
    
    
    894
    
    
    
    993Litigation settlement
    
    
    
    
    
    
    750Liability related to modification of media distribution
agreement
    
    
    
    
    
    
    2,000Other
    
    
    1,714
    
    
    
    1,210$
    5,017
    
    
    $
    6,712
 Note 4  Debt
 Convertible Subordinated Notes
  F-16




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Line
of Credit  Wells Fargo Business Credit, Inc.
  Line
of Credit  Silicon Valley Bank
  F-17




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Notes Payable  Suppliers
  F-18




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note Payable  Lessor
   Note 5  Stock Compensation Plans
 Fixed Stock Option Plans
  F-19




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2003
    
    
    2004
    
    
    2005Shares
    
    
    Weighted-Ave.
    
    
    Shares
    
    
    Weighted-Ave.
    
    
    Shares
    
    
    Weighted-Ave.(000s)
    
    
    Exercise Price
    
    
    (000s)
    
    
    Exercise Price
    
    
    (000s)
    
    
    Exercise PriceOutstanding at
beginning of year
    
    
    1,902
    
    
    $
    20.00
    
    
    
    2,742
    
    
    $
    8.30
    
    
    
    4,132
    
    
    $
    8.05Granted at
fair market
value
    
    
    1,444
    
    
    
    2.20
    
    
    
    1,549
    
    
    
    8.30
    
    
    
    6,666
    
    
    
    1.19Exercised
    
    
    (2
    )
    
    
    6.50
    
    
    
    (32
    )
    
    
    5.50
    
    
    
    (18
    )
    
    
    1.81Forfeited
    
    
    (602
    )
    
    
    31.40
    
    
    
    (127
    )
    
    
    16.00
    
    
    
    (264
    )
    
    
    14.21Outstanding at end
of year
    
    
    2,742
    
    
    $
    8.30
    
    
    
    4,132
    
    
    $
    8.05
    
    
    
    10,516
    
    
    $
    3.56Options exercisable
at year end
    
    
    763
    
    
    $
    15.10
    
    
    
    1,336
    
    
    $
    10.20
    
    
    
    8,764
    
    
    $
    4.00Weighted-average
fair value of
options granted
during the year
    
    
    
    
    
    $
    1.70
    
    
    
    
    
    
    $
    7.10
    
    
    
    
    
    
    $
    0.84
  Options Outstanding
    
    
    Options ExercisableNumberOutstanding(000s)
    
    
    Weighted-Avg.
    
    
    Weighted-Avg.
    
    
    Number
    
    
    Weighted-Avg.Range of
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable
    
    
    ExerciseExercise Prices
    
    
    Contractual Life
    
    
    Price
    
    

(000s)
    
    
    Price$1.05 - 4.50
    
    
    7,816
    
    
    
    9.56
    
    
    $
    1.27
    
    
    
    6,066
    
    
    $
    1.244.51 - 8.20
    
    
    1,788
    
    
    
    8.01
    
    
    
    7.83
    
    
    
    1,786
    
    
    
    7.838.21 - 14.00
    
    
    842
    
    
    
    6.64
    
    
    
    11.73
    
    
    
    842
    
    
    
    11.7314.01  175.00
    
    
    70
    
    
    
    4.19
    
    
    
    51.71
    
    
    
    70
    
    
    
    51.7110,516
    
    
    
    9.03
    
    
    $
    3.56
    
    
    
    8,764
    
    
    $
    4.00
   F-20




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Percentage
    
    
    WeightedAggregate
    
    
    of
    
    
    averagenumber of stock
    
    
    aggregate
    
    
    exerciseTotal
    
    
    options for
    
    
    number of
    
    
    price ofoutstanding
    
    
    which vesting
    
    
    accelerated
    
    
    acceleratedoptions
    
    
    was accelerated
    
    
    options
    
    
    optionsNamed Executive Officers (1)
    
    
    1,908
    
    
    
    710
    
    
    
    43.5
    %
    
    $
    10.60Non-employee Directors
    
    
    161
    
    
    
    45
    
    
    
    2.8
    %
    
    $
    8.10Total Executive Officers and Directors
    
    
    2,069
    
    
    
    755
    
    
    
    46.3
    %
    
    $
    10.40All Other Employees
    
    
    1,889
    
    
    
    877
    
    
    
    53.7
    %
    
    $
    8.10Total
    
    
    3,958
    
    
    
    1,632
    
    
    
    100.0
    %
    
    $
    9.20
 
 (1)
    
    Includes current executive officers, as named in the Companys 2005 Proxy Statement filed
with the Securities and Exchange Commission on June 15, 2005. Employee Stock Purchase Plan
   2003
    
    2004
    
    2005Estimated dividends
    
    None
    
    None
    
    NoneExpected volatility
    
    190%
    
    176%
    
    106%Risk-free interest rate
    
    1.9%-2.2%
    
    2.3%-3.1%
    
    3.7% - 4.4%Expected term (years)
    
    0.5
    
    0.5
    
    0.5Weighted-average fair
value of purchase
rights granted
    
    $1.30
    
    $5.90
    
    1.53
 F-21




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6  Preferred Stock
  Series AA
Convertible Preferred Stock
      F-22




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Series G Preferred Stock
  Series H Preferred Stock
  Series I Preferred Stock
    Note 7  Derivative Financial Instruments
   F-23




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (in 000s)
    
    Series AAConversion
    
    
    Anti-dilutionfeature
    
    
    feature
    
    
    Total
    
    
    Warrants
    
    
    TotalInception (May 3, 2004)
    
    $
    32,847
    
    
    $
    3,283
    
    
    $
    36,130
    
    
    $
    10,109
    
    
    $
    46,239December 31, 2004
    
    
    6,669
    
    
    
    2,443
    
    
    
    9,112
    
    
    
    2,053
    
    
    
    11,165December 31, 2005
    
    
    13,498
    
    
    
    2,424
    
    
    
    15,922
    
    
    
    748
    
    
    
    16,670
 Convertible NotesConversion
    
    
    Anti-dilutionfeature
    
    
    feature
    
    
    Total
    
    
    Warrants
    
    
    TotalInception
(December 1, 2005)
    
    $
    7,300
    
    
    $
    564
    
    
    $
    7,864
    
    
    $
    3,650
    
    
    $
    11,514December 31, 2005
    
    
    6,207
    
    
    
    592
    
    
    
    6,799
    
    
    
    3,104
    
    
    
    9,903
 Imation WarrantsConversion
    
    
    Anti-dilutionfeature
    
    
    feature
    
    
    Total
    
    
    Warrants
    
    
    TotalInception
(December 1, 2005)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    574
    
    
    $
    574December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    487
    
    
    
    487
 TotalConversion
    
    
    Anti-dilutionfeature
    
    
    feature
    
    
    Total
    
    
    Warrants
    
    
    TotalDecember 31, 2004
    
    $
    6,669
    
    
    $
    2,443
    
    
    $
    9,112
    
    
    $
    2,053
    
    
    $
    11,165December 31, 2005
    
    
    19,705
    
    
    
    3,016
    
    
    
    22,721
    
    
    
    4,339
    
    
    
    27,060
  F-24




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Series AAInception
    
    December 31, 2004
    
    December 31, 2005Estimated dividends
    
    None
    
    None
    
    NoneExpected volatility
    
    155.0%
    
    76.2%
    
    111.5%Risk-free interest rate
    
    3.26%
    
    3.21%
    
    4.39%Expected term (years)
    
    5.00
    
    4.33
    
    3.33
 Convertible Notes and Imation WarrantsInception
    
    December 31, 2005Estimated dividends
    
    None
    
    NoneExpected volatility
    
    106.3%
    
    111.5%Risk-free interest rate
    
    4.30%
    
    4.39%Contractual term (years)
    
    4.92
    
    4.83
  Series AAInception
    
    December 31, 2004
    
    December 31, 2005Estimated dividends
    
    None
    
    None
    
    NoneExpected volatility
    
    155.0%
    
    76.2%
    
    111.5%Risk-free interest rate
    
    3.26%
    
    3.21%
    
    4.39%Expected term (years)
    
    1.92 - 5.00
    
    1.17 - 4.25
    
    0.17 - 3.25Estimated probability
of a future dilutive
financing transaction
    
    10%
    
    10%
    
    10%
 Convertible Notes and Imation WarrantsInception
    
    December 31, 2005Estimated dividends
    
    None
    
    NoneExpected volatility
    
    106.3%
    
    111.5%Risk-free interest rate
    
    4.30  4.35
    
    4.39%Expected term (years)
    
    1.83  4.91
    
    1.75  4.83Estimated probability of a future dilutive
financing transaction
    
    10%
    
    10%
  F-25




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note
8  Restatement of Previously Issued Financial Statements
   F-26




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  As of or for the three months endedJune 30, 2004
    

September 30, 2004
    

December 31, 2004As
    
    As
    
    As
    
    As
    
    As
    
    Asreported
    
    restated
    
    reported
    
    restated
    
    reported
    
    restatedStatement of Operations:Net revenue
    
    $
    26,620
    
    
    $
    26,620
    
    
    $
    23,566
    
    
    $
    23,566
    
    
    $
    25,726
    
    
    $
    25,726Gross Profit
    
    
    7,447
    
    
    
    7,447
    
    
    
    4,962
    
    
    
    4,962
    
    
    
    6,559
    
    
    
    6,559Loss from operations
    
    
    (1,130
    )
    
    
    (1,130
    )
    
    
    (3,514
    )
    
    
    (3,514
    )
    
    
    (1,216
    )
    
    
    (1,216
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    (3,961
    )
    
    
    
    
    
    
    30,387
    
    
    
    
    
    
    
    8,648Other financing costs
    
    
    
    
    
    
    (1,330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    
    (456
    )
    
    
    (5,747
    )
    
    
    (3,881
    )
    
    
    26,507
    
    
    
    (2,267
    )
    
    
    6,380Deemed
dividends  issuance of
Series AA and amortization of
related discount
    
    
    
    
    
    
    (45,024
    )
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    (199
    )Net earnings
(loss) available to common shareholders
    
    
    (4,681
    )
    
    
    (54,996
    )
    
    
    (3,881
    )
    
    
    26,326
    
    
    
    (2,267
    )
    
    
    6,181Basic earnings (loss) per share
    
    
    (0.44
    )
    
    
    (5.12
    )
    
    
    (0.37
    )
    
    
    2.41
    
    
    
    (0.20
    )
    
    
    0.56Diluted loss per share
    
    
    (0.44
    )
    
    
    (5.12
    )
    
    
    (0.37
    )
    
    
    (0.24
    )
    
    
    (0.20
    )
    
    
    (0.14
    )Balance Sheet:Current assets
    
    $
    35,972
    
    
    $
    35,972
    
    
    $
    28,635
    
    
    $
    28,635
    
    
    $
    29,093
    
    
    $
    29,093Current liabilities
    
    
    26,561
    
    
    
    26,561
    
    
    
    21,925
    
    
    
    21,925
    
    
    
    26,105
    
    
    
    26,105Notes payable, less current portion
    
    
    8,217
    
    
    
    8,217
    
    
    
    10,090
    
    
    
    10,090
    
    
    
    9,183
    
    
    
    9,183Derivative financial instruments,
at estimated fair value
    
    
    
    
    
    
    50,200
    
    
    
    
    
    
    
    19,813
    
    
    
    
    
    
    
    11,165Deferred revenue and other
non-current liabilities
    
    
    17,694
    
    
    
    17,694
    
    
    
    16,757
    
    
    
    16,757
    
    
    
    16,443
    
    
    
    16,443Series AA convertible preferred
stock, net
    
    
    
    
    
    
    37,561
    
    
    
    
    
    
    
    37,742
    
    
    
    
    
    
    
    37,941Stockholders deficit
    
    
    (5,625
    )
    
    
    (93,386
    )
    
    
    (9,484
    )
    
    
    (67,039
    )
    
    
    (11,752
    )
    
    
    (60,858
    )
 F-27




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of or for the yearendedDecember 31, 2004As
    
    Asreported
    
    restatedStatement of Operations:Net revenue
    
    $
    102,051
    
    
    $
    102,051Gross Profit
    
    
    25,054
    
    
    
    25,054Loss from operations
    
    
    (7,973
    )
    
    
    (7,973
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    35,074Other financing costs
    
    
    
    
    
    
    (1,330
    )Net earnings (loss)
    
    
    (9,914
    )
    
    
    23,830Deemed
dividends  issuance of Series AA
and amortization of related discount
    
    
    
    
    
    
    (45,404
    )Net loss available to common
shareholders
    
    
    (14,139
    )
    
    
    (25,799
    )Basic and diluted loss per share
    
    
    (1.34
    )
    
    
    (2.44
    )Balance Sheet:Current assets
    
    $
    29,093
    
    
    $
    29,093Current liabilities
    
    
    26,105
    
    
    
    26,105Notes payable, less current portion
    
    
    9,183
    
    
    
    9,183Derivative financial instruments, at
estimated fair value
    
    
    
    
    
    
    11,165Deferred revenue and other non-current
liabilities
    
    
    16,443
    
    
    
    16,443Series AA convertible preferred stock, net
    
    
    
    
    
    
    37,941Stockholders deficit
    
    
    (11,752
    )
    
    
    (60,858
    )
 F-28




---



##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 As of or for the three months endedMarch 31, 2005
    
    June 30, 2005
    
    September 30, 2005As
    
    As
    
    As
    
    As
    
    As
    
    Asreported
    
    restated
    
    reported
    
    restated
    
    reported
    
    restatedStatement of Operations:Net revenue
    
    $
    24,623
    
    
    $
    24,623
    
    
    $
    23,776
    
    
    $
    23,776
    
    
    $
    21,306
    
    
    $
    21,306Gross Profit
    
    
    7,168
    
    
    
    7,168
    
    
    
    7,068
    
    
    
    7,068
    
    
    
    5,822
    
    
    
    5,822Loss from operations
    
    
    (785
    )
    
    
    (785
    )
    
    
    (889
    )
    
    
    (889
    )
    
    
    (2,049
    )
    
    
    (2,049
    )Change in estimated fair value of
derivative financial instruments
    
    
    
    
    
    
    5,099
    
    
    
    
    
    
    
    (4,311
    )
    
    
    
    
    
    
    (25,972
    )Net earnings (loss)
    
    
    (931
    )
    
    
    4,168
    
    
    
    (2,207
    )
    
    
    (6,517
    )
    
    
    (2,296
    )
    
    
    (28,268
    )Deemed dividends  amortization of
discount on Series AA
    
    
    
    
    
    
    (217
    )
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (257
    )Net earnings (loss) available to
common shareholders
    
    
    (931
    )
    
    
    3,951
    
    
    
    (2,207
    )
    
    
    (6,754
    )
    
    
    (2,296
    )
    
    
    (28,525
    )Basic earnings (loss) per share
    
    
    (0.08
    )
    
    
    0.35
    
    
    
    (0.19
    )
    
    
    (0.59
    )
    
    
    (0.20
    )
    
    
    (2.44
    )Diluted loss per share
    
    
    (0.08
    )
    
    
    (0.06
    )
    
    
    (0.19
    )
    
    
    (0.59
    )
    
    
    (0.20
    )
    
    
    (2.44
    )Balance Sheets:Current assets
    
    $
    28,970
    
    
    $
    28,970
    
    
    $
    26,638
    
    
    $
    26,638
    
    
    $
    22,546
    
    
    $
    22,546Current liabilities
    
    
    29,047
    
    
    
    29,047
    
    
    
    30,843
    
    
    
    30,843
    
    
    
    30,651
    
    
    
    30,651Notes payable, less current portion
    
    
    7,410
    
    
    
    7,410
    
    
    
    6,078
    
    
    
    6,078
    
    
    
    4,827
    
    
    
    4,827Derivative financial instruments,
at estimated fair value
    
    
    
    
    
    
    6,066
    
    
    
    
    
    
    
    10,377
    
    
    
    
    
    
    
    36,349Deferred revenue and other
non-current liabilities
    
    
    16,059
    
    
    
    16,059
    
    
    
    15,510
    
    
    
    15,510
    
    
    
    15,039
    
    
    
    15,039Series AA convertible preferred
stock, net
    
    
    
    
    
    
    38,158
    
    
    
    
    
    
    
    38,395
    
    
    
    
    
    
    
    38,652Stockholders deficit
    
    
    (12,644
    )
    
    
    (56,868
    )
    
    
    (14,794
    )
    
    
    (63,566
    )
    
    
    (17,045
    )
    
    
    (92,046
    )
  F-29




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Income Taxes
  2003
    
    
    2004
    
    
    2005(In thousands)
    
    
    
    
    
    (as restated)Domestic
    
    $
    (42,749
    )
    
    $
    24,943
    
    
    $
    (11,007
    )Foreign
    
    
    (855
    )
    
    
    (1,066
    )
    
    
    (903
    )$
    (43,604
    )
    
    $
    23,877
    
    
    $
    (11,910
    )
  2003
    
    
    2004
    
    
    2005(In
thousands)
    
    
    
    
    
    (as restated)Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    88
    
    
    
    47
    
    
    
    160$
    88
    
    
    $
    47
    
    
    $
    160
  2003
    
    
    2004
    
    
    2005(In
thousands)
    
    
    
    
    
    (as restated)U.S. federal
income tax expense
(benefit) at
statutory rate
    
    $
    (15,261
    )
    
    $
    8,343
    
    
    $
    (4,217
    )State income taxes,
net of federal
benefit
    
    
    (1,390
    )
    
    
    814
    
    
    
    (167
    )Change in fair value of derivative financial instruments
    
    
    
    
    
    
    (12,924
    )
    
    
    2,210Valuation allowance
    
    
    16,381
    
    
    
    3,330
    
    
    
    1,963Foreign taxes in
excess of 35%
    
    
    88
    
    
    
    47
    
    
    
    160Other
    
    
    270
    
    
    
    437
    
    
    
    211$
    88
    
    
    $
    47
    
    
    $
    160
 F-30




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2004
    
    
    2005(In thousands)
    
    (as restated)Current assets:Warranty reserve
    
    $
    1,365
    
    
    $
    1,289Allowance for uncollectible accounts receivable
    
    
    727
    
    
    
    909Reserves for excess or obsolete inventory
    
    
    3,615
    
    
    
    3,043Other
    
    
    2,512
    
    
    
    1,4298,219
    
    
    
    6,670Less: valuation allowance
    
    
    (8,219
    )
    
    
    (6,670
    )$
    
    
    
    $
    Noncurrent assets:Net operating loss carry forwards
    
    $
    79,613
    
    
    $
    91,986Deferred revenue
    
    
    6,262
    
    
    
    2,201Equipment and leasehold improvements
    
    
    2,179
    
    
    
    2,433Credit carry forwards
    
    
    4,774
    
    
    
    4,774Goodwill
    
    
    358
    
    
    
    244Capitalized research and development for tax
purposes
    
    
    28,047
    
    
    
    23,855Other
    
    
    2,302
    
    
    
    1,632123,535
    
    
    
    127,125Less: valuation allowance
    
    
    (123,535
    )
    
    
    (127,125
    )$
    
    
    
    $
    
   F-31




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Workforce Reductions
  2003
  2004
  2005
  Note 11  Media Distribution Agreement
   F-32




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 12  Commitments and Contingencies
 Indemnities, Commitments and Guaranties
  (In thousands)2006
    
    $
    9032007
    
    
    8522008
    
    
    8732009
    
    
    8662010
    
    
    439$
    3,933
   F-33




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Litigation
     Note 13  Lease Terminations
  F-34




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 14  Employee Benefit Plan
  Note 15  Concentration of Credit Risk and Significant Customers
  Accounts Receivable
    
    RevenueDecember 31,
    
    December 31,
    
    Fiscal Year Ended2004
    
    2005
    
    2003
    
    2004
    
    2005Imation
    
    
    28.1
    %
    
    
    29.7
    %
    
    
    8.8
    %
    
    
    39.8
    %
    
    
    40.6
    %Tech Data
    
    
    13.1
    
    
    
    26.1
    
    
    
    16.2
    
    
    
    10.5
    
    
    
    16.1Ingram-Micro
    
    
    17.8
    
    
    
    22.5
    
    
    
    16.0
    
    
    
    9.0
    
    
    
    11.7Fujitsu Siemens
    
    
    12.9
    
    
    
    14.8
    
    
    
    5.9
    
    
    
    8.7
    
    
    
    9.8IBM
    
    
    17.2
    
    
    
    6.3
    
    
    
    6.8
    
    
    
    12.9
    
    
    
    8.5
  Note 16  Segment, Geographic and Sales Information
   F-35




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (In thousands)
    
    2003
    
    
    2004
    
    
    2005United States
    
    $
    65,075
    
    
    $
    72,611
    
    
    $
    63,322Europe
    
    
    21,329
    
    
    
    23,292
    
    
    
    24,129Asia Pacific
    
    
    7,241
    
    
    
    4,614
    
    
    
    3,148Other
    
    
    524
    
    
    
    1,534
    
    
    
    369$
    94,169
    
    
    $
    102,051
    
    
    $
    90,968
  (In thousands)
    
    2003
    
    
    2004
    
    
    2005Drives
    
    $
    28,415
    
    
    $
    32,666
    
    
    $
    20,685Automation
    
    
    13,444
    
    
    
    24,036
    
    
    
    33,431Media
    
    
    44,457
    
    
    
    41,146
    
    
    
    35,705Service and other
    
    
    9,077
    
    
    
    7,413
    
    
    
    5,355Sales allowances
    
    
    (1,224
    )
    
    
    (3,210
    )
    
    
    (4,208
    )$
    94,169
    
    
    $
    102,051
    
    
    $
    90,968
 Note 17  Quarterly Information (Unaudited)
 2004(In thousands, except per share data, and as restated  see Note 8)
    
    Q1
    
    Q2
    
    Q3
    
    Q4Net revenue
    
    $
    26,139
    
    
    $
    26,620
    
    
    $
    23,566
    
    
    $
    25,726Gross profit
    
    
    6,086
    
    
    
    7,447
    
    
    
    4,962
    
    
    
    6,559Net earnings (loss)
    
    
    (3,310
    )
    
    
    (5,747
    )
    
    
    26,507
    
    
    
    6,380Net earnings (loss) available to
common stockholders
    
    
    (3,310
    )
    
    
    (54,996
    )
    
    
    26,326
    
    
    
    6,181Basic earnings (loss) per share
    
    
    (0.34
    )
    
    
    (5.12
    )
    
    
    2.41
    
    
    
    0.56Diluted loss per share
    
    
    (0.34
    )
    
    
    (5.12
    )
    
    
    (0.24
    )
    
    
    (0.14
    )
 2005(In thousands, except per share data, and as restated  see Note 8)
    
    Q1
    
    Q2
    
    Q3
    
    Q4Net revenue
    
    $
    24,623
    
    
    $
    23,776
    
    
    $
    21,306
    
    
    $
    21,263Gross profit
    
    
    7,168
    
    
    
    7,068
    
    
    
    5,822
    
    
    
    5,515Net earnings (loss)
    
    
    4,168
    
    
    
    (6,518
    )
    
    
    (28,268
    )
    
    
    18,549Net earnings (loss) available to
common stockholders
    
    
    3,951
    
    
    
    (6,755
    )
    
    
    (28,525
    )
    
    
    18,270Basic earnings (loss) per share
    
    
    0.35
    
    
    
    (0.59
    )
    
    
    (2.44
    )
    
    
    1.37Diluted loss per share
    
    
    (0.06
    )
    
    
    (0.59
    )
    
    
    (2.44
    )
    
    
    (0.05
    )
 F-36




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 18  Recent Accounting Pronouncements
        F-37




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##### Table of Contents



(A) 3. EXHIBIT INDEX
 Exhibit Number
    
    
    Description2.1
    
    
    Agreement and Plan of Merger among
Exabyte Corporation, Bronco Acquisition, Inc., Ecrix Corporation,
Certain Lenders, and Certain Investors, Dated as of August 22,
2001 (1)3.1
    
    
    Restated Certificate of
Incorporation (3)3.2
    
    
    2001 Amendment to Restated
Certificate of Incorporation (4); and 2003 Amendment to Article Fourth
of Restated Certificate of Incorporation (20)3.3
    
    
    By-laws of the Company, as amended (5)3.4
    
    
    Certificate of Designation of
Preferences, Rights and Limitations of Series AA Convertible
Preferred Stock (6)4.1
    
    
    Article Fourth of the Restated
Certificate of Incorporation (included in Exhibits 3.1 and 3.2)4.2
    
    
    Article 1 of the By-laws of Exabyte Corporation, as amended (included in Exhibit 3.3)4.3
    
    
    Specimen stock certificate of
Exabyte (1)4.4
    
    
    Form of Common Stock Purchase
Warrant, May 2004 (6)4.5
    
    
    Form of Common Stock Purchase
Warrant issued to Convertible Noteholders, November 2005 (7)4.6
    
    
    Form of Common Stock Purchase
Warrant issued to Imation Corporation, November 2005 (7)**10.1
    
    
    Incentive Stock Plan, as amended
and restated on September 11, 2002 (8)**10.2
    
    
    Stock Option Agreement used in
connection with the Incentive Stock Plan (20)**10.3
    
    
    1990 Employee Stock Purchase Plan (9)**10.5
    
    
    Form of participation agreement
used in connection with the 1990 Employee Stock Purchase Plan (11)**10.6
    
    
    1997 Non-officer Stock Option Plan,
as amended and restated on January 19, 2001 (12)**10.7
    
    
    Stock Option Agreement used in
connection with the 1997 Non-Officer Stock Option Plan (10)**10.8
    
    
    2004 Exabyte Corporation Stock
Option Plan (13)**10.9
    
    
    Form of Stock Option Agreement used
in connection with the 2004 Stock Option Plan (13)10.10
    
    
    Form of Indemnity Agreement entered
into by the Company with each director and executive officer of the
Company (13)*10.11
    
    
    Manufacturing and Purchase
Agreement, dated March 1, 2001, among Hitachi, Ltd., Nihon
Exabyte Corporation and Exabyte Corporation (14)10.12
    
    
    Exabyte Purchase Agreement between
the Company and Singapore Shinei Sangyo PTE., Ltd., dated
February 3, 1999 (1)10.13
    
    
    Amendment #A01 to Purchase
Agreement between the Company and Singapore Shinei Sangyo, dated
January 24, 2001 (1)10.14
    
    
    Supplier Managed Inventory
Agreement between the Company and Singapore Shinei Sangyo, dated
January 24, 2001 (20)10.15
    
    
    Lease Agreement between Industrial
Housing Company LLC and Ecrix Corporation, dated December 14,
1998,as amended (2)10.16
    
    
    Lease Agreement between Cottonwood
Farms Ltd. and Ecrix Corporation, dated September 7, 1999, as amended (2)10.17
    
    
    Amendment to Lease between
Cottonwood Land and Farms, Ltd. and Ecrix Corporation, dated
April 15, 2000 (2)*10.18
    
    
    Exabyte Payment and Repayment Plan
Memorandum of Understanding, by and between Exabyte Corporation and
Nihon Exabyte Corporation, and Hitachi, Ltd., dated February 14, 2003 (8)10.19
    
    
    Amendment dated November 1,
2005 to the Memorandum of Understanding, by and between the Company
and Hitachi, Ltd., originally dated February 14, 2003 (15)*10.20
    
    
    Exabyte Payment and Repayment Plan,
among the Company, Nihon Exabyte Corporation and Hitachi, Ltd., dated
August 25, 2003 (16)*10.21
    
    
    Agreement for Debt Restructuring
and Modification of Manufacturing Terms, among the Company, Solectron
Corporation and Shinei International Pte. Ltd., dated September 1,
2003 (16)
 Exhibit - 1




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##### Table of Contents



Exhibit Number
    
    
    Description*10.22
    
    
    Manufacturing Service Agreement,
among the Company and Solectron Corporation, dated May 28,
2004 (13)*10.23
    
    
    Depot Repair Services Agreement,
among the Company and Teleplan Service Logistics, Inc., dated
June 2003 (16)*10.24
    
    
    Amendment #A01 to Depot Repair
Services Agreement, among the Company and Teleplan Service Logistics,
Inc., dated October 2004 (13)*10.25
    
    
    Settlement Agreement, among the
Company and 1685-1775 38th St, LLC, dated November  4, 2003 (16)10.26
    
    
    Lease Termination Agreement, among
the Company and Eastpark, LLC f/k/a Eastpark Associates, Ltd., dated
September 26, 2003 (16)10.27
    
    
    Promissory Note among the Company
and Eastpark, LLC f/k/a Eastpark Associated Ltd., dated
September 1, 2003 (16)*10.28
    
    
    Media Distribution Agreement, by
and between Exabyte Corporation and Imation Corp, dated
November 7, 2003 (17)10.29
    
    
    Amendment No. 2 to Media
Distribution Agreement, by and between Exabyte Corporation and
Imation Corporation with forms of the $5,000,000 Note and $2,000,000
Note (7)*10.30
    
    
    Software License and Maintenance
Agreement, by and between Exabyte Corporation and MSS Technologies,
Inc., dated November 26, 2003 (17)*10.31
    
    
    Manufacturing and Purchase
Agreement, by and between Exabyte Corporation and ESGW International
Limited, dated January 20, 2004 (13)*10.32
    
    
    Joint Development Agreement, by and
between the company and Hitachi, Ltd., dated June 2004 (13)10.33
    
    
    Form of Exchange Agreement executed
by holders of Exabyte Corporation Series H Preferred Stock (6)10.34
    
    
    Form of Exchange Agreement executed
by holders of Exabyte Corporation Series I Preferred Stock (6)10.35
    
    
    Securities Purchase Agreement,
dated as of April 30, 2004, by and between Exabyte Corporation
and each ofthe Purchasers (6)10.36
    
    
    Registration Rights Agreement,
dated as of May 3, 2004, by and between Exabyte Corporation and
each of the Purchasers (6)*10.37
    
    
    Credit and Security Agreement, by
and between the Company and Wells Fargo Business Credit, Inc., dated
March 9, 2005 (13)10.38
    
    
    Amendment No. 1 dated
August 12, 2005 to the Credit and Security Agreement by and
between the Company and Wells Fargo Business Credit, Inc., dated
March 9, 2005 (18)10.39
    
    
    Second Amendment (dated
October 31, 2005) to the Credit and Security Agreement between the
Company and Wells Fargo Bank, National Association acting through its
Wells Fargo Business Credit division (7)10.40
    
    
    Securities Purchase Agreement,
dated as of October 31, 2005, by and between Exabyte Corporation
and each of the Purchasers (7)10.41
    
    
    Registration Rights Agreement,
dated as of October 31, 2005, by and between Exabyte Corporation
and each of the Purchasers (7)10.42
    
    
    Security Agreement, dated
October 31, 2005, by and between Exabyte Corporation and each of
the Purchasers (7)10.43
    
    
    Intercreditor Agreement, dated
October 31, 2005, among Exabyte Corporation, Wells Fargo Bank,
Purchasers of the Convertible Notes and Imation (7)10.44
    
    
    Amendment No. 1 to the
Series AA Securities Purchase Agreement, effective as of
October 5, 2005, among the Company and certain Purchasers of the
Series AA Preferred Stock (7)10.45
    
    
    Agreement for Issuance of Stock,
dated as of October 31, 2005, between Exabyte Corporation and
Imation Corp. (7)**10.46
    
    
    Employment letter agreement, dated
May 30, 2002, between Exabyte and Mr. Ward (19)**10.47
    
    
    Investment letter agreement, dated
May 30, 2002, between Exabyte and Mr. Ward, with approval
of other Series I preferred purchasers to be obtained (19)**10.48
    
    
    Exabyte Corporation Non-Statutory
Stock Option Agreement, dated June 3, 2002 between Exabyte and
Mr. Ward (19)**10.49
    
    
    Exabyte Corporation Non-Statutory
Stock Option Agreement, dated August 22, 2003 between Exabyte and
Mr. Ward (20)
 Exhibit - 2




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##### Table of Contents



Exhibit Number
    
    Description**10.50
    
    Extension dated July 29, 2005 of
employment letter agreement between Exabyte and Mr. Ward (20)21.1
    
    List of Subsidiaries23.1
    
    Consent of PricewaterhouseCoopers LLP23.2
    
    Consent of Ehrhardt Keefe Steiner & Hottman P.C.24.1
    
    Power of Attorney. Reference is made to the signature page.31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer32.1
    
    Section 1350 Certification
 
   (1)
    
    Filed as an Exhibit to the Companys Registration
Statement on Form S-4, filed with the SEC on September 21, 2001, and incorporated herein by reference.
 (2)
    
    Filed as an Exhibit to Amendment No. 1 to the
Companys Registration Statement on Form S-4, filed with
the SEC on October 5, 2001, and incorporated herein by reference.
 (3)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-1 (Registration No.
33-30941) filed with the Securities and Exchange Commission (the
SEC) on September 8, 1989 or Amendments Nos. 1 and 2 thereto (filed on October 12, 1989 and October 16, 1989 respectively), and incorporated herein by reference.
 (4)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8A/A filed with the SEC on June 7, 2002 and incorporated herein by reference.
 (5)
    
    Filed as an Exhibit to the Companys Registration Statement on Form 8-A/A filed with the SEC on June 7, 2002 and incorporated herein by reference.
 (6)
    
    Filed as an Exhibit to the Companys Current Report on Form 8-K, filed with the SEC on May 4, 2004, and incorporated herein by reference.
 (7)
    
    Filed as an Exhibit to the Companys Form 8-K filed with the SEC on November 1, 2005, and incorporated herein by reference.
 (8)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on March 28, 2003, and incorporated herein by reference.
 (9)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-09279), as filed with the SEC on June 16, 2000 and incorporated herein by reference.
 (10)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-73011), as filed with the SEC on March 1, 2000, and incorporated herein by reference.
 (11)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 33-33414), as filed with the SEC on February 9, 1990 and incorporated herein by reference.
 (12)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-67464), as filed with the SEC on August 14, 2001, and incorporated herein by reference.
 (13)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on March 21, 2005, and incorporated herein by reference.
 (14)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on April 27, 2001, and incorporated herein by reference.
 (15)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2005, and incorporated by reference
 (16)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2003, and incorporated herein by reference.
 (17)
    
    Filed as an Exhibit to the Companys Annual Report on form 10-K, filed with the SEC on March 31, 2004, and incorporated herein by reference.
 (18)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2005, and incorporated by reference.
 (19)
    
    Filed as an Exhibit to the Companys Form 8-K filed with the SEC on June 3, 2002, and incorporated herein by reference.
 (20)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-1 filed with the SEC on December 6, 2005, and incorporated herein by reference.




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##### Table of Contents



EXABYTE CORPORATION AND SUBSIDIARIES
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Col. A
    
    Col. B
    
    Col. C (a)
    
    Col. C (b)
    
    
    
    
    Col. D

    
    
    
    Col. EBalance At
    
    Charged toBeginning of
    
    Costs and
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance
atDescription
    
    Period
    
    Expenses
    
    Other Accounts
    
    
    
    
    
    
    Deduction
    
    
    
    
    
End
of PeriodYear Ended January 3, 2004:Allowance for doubtful
accounts
    
    $
    512
    
    $
    6,678
    
    $
    1
    
    
    
    
    
    
    $
    (7,056
    )
    (1
    )
    
    
    
    $
    135Reserves for sales returns
and programs
    
    
    3,047
    
    
    
    
    
    (1,378
    )
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    1,669Inventory
valuation
reserves
    
    
    13,130
    
    
    9,814
    
    
    
    
    
    
    
    
    
    
    (11,591
    )
    (3
    )
    
    
    
    
    11,353$
    16,689
    
    $
    16,492
    
    $
    (1,377
    )
    
    
    
    
    
    $
    (18,647
    )
    
    
    
    
    
    $
    13,157Year Ended December 31, 2004:Allowance for doubtful
accounts
    
    $
    135
    
    $
    130
    
    $
    1
    
    
    
    
    
    
    $
    (102
    )
    (1
    )
    
    
    
    $
    164Reserves for sales returns
and programs
    
    
    1,669
    
    
    
    
    
    77
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    1,746Inventory valuation
reserves
    
    
    11,353
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    (4,145
    )
    (3
    )
    
    
    
    
    8,358$
    13,157
    
    $
    1,280
    
    $
    78
    
    
    
    
    
    
    $
    (4,247
    )
    
    
    
    
    
    $
    10,268Year Ended December 31, 2005:Allowance for doubtful
accounts
    
    $
    164
    
    $
    110
    
    $
    (2
    )
    
    
    
    
    
    $
    (225
    )
    (1
    )
    
    
    
    $
    47Reserves for sales returns
and programs
    
    
    1,746
    
    
    
    
    
    589
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    2,335Inventory valuation
reserves
    
    
    8,358
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    (5,856
    )
    (3
    )
    
    
    
    
    4,102$
    10,268
    
    $
    1,710
    
    $
    587
    
    
    
    
    
    
    $
    (6,081
    )
    
    
    
    
    
    $
    6,484
 
    S-1




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##### Table of Contents



SIGNATURES
  EXABYTE CORPORATIONBy:
    
    /s/ Carroll A. WallaceCarroll A. WallaceTitle:
    
    Chief Financial Officer, Treasurer(Principal Financial and Accounting Officer)
 POWER OF ATTORNEY
   /s/ Tom W. Ward
    
    President and Chief Executive
    
    March 15, 2006Tom W. Ward
    
    Officer (Principal Executive Officer)/s/ Juan A. Rodriguez
    
    Chairman of the Board, Chief
    
    March 15, 2006Juan A. Rodriguez
    
    Technologist/s/ Carroll A. Wallace
    
    Chief Financial Officer,
    
    March 15, 2006Carroll A. Wallace
    
    Treasurer (Principal Financial andAccounting Officer)/s/ Leonard W. Busse
    
    Director
    
    March 15, 2006Leonard W. Busse/s/ John Garrett
    
    Director
    
March 15, 2006John Garrett/s/ A. Laurence Jones
    
    Director
    
    March 15, 2006A. Laurence Jones/s/ Thomas E. Pardun
    
    Director
    
    March 15, 2006Thomas E. Pardun/s/ Stephanie Smeltzer McCoy
    
    Director
    

March 15, 2006Stephanie L. Smeltzer/s/ G. Jackson Tankersley, Jr.
    
    Director
    
    March 15, 2006G. Jackson Tankersley, Jr.




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##### Table of Contents



EXHIBIT INDEX Exhibit Number
    
    
    Description2.1
    
    
    Agreement and Plan of Merger among
Exabyte Corporation, Bronco Acquisition, Inc., Ecrix Corporation,
Certain Lenders, and Certain Investors, Dated as of August 22,
2001 (1)3.1
    
    
    Restated Certificate of
Incorporation (3)3.2
    
    
    2001 Amendment to Restated
Certificate of Incorporation (4); and 2003 Amendment to Article Fourth
of Restated Certificate of Incorporation (20)3.3
    
    
    By-laws of the Company, as amended (5)3.4
    
    
    Certificate of Designation of
Preferences, Rights and Limitations of Series AA Convertible
Preferred Stock (6)4.1
    
    
    Article Fourth of the Restated
Certificate of Incorporation (included in Exhibits 3.1 and 3.2)4.2
    
    
    Article 1 of the By-laws of Exabyte Corporation, as amended (included in Exhibit 3.3)4.3
    
    
    Specimen stock certificate of
Exabyte (1)4.4
    
    
    Form of Common Stock Purchase
Warrant, May 2004 (6)4.5
    
    
    Form of Common Stock Purchase
Warrant issued to Convertible Noteholders, November 2005 (7)4.6
    
    
    Form of Common Stock Purchase
Warrant issued to Imation Corporation, November 2005 (7)**10.1
    
    
    Incentive Stock Plan, as amended
and restated on September 11, 2002 (8)**10.2
    
    
    Stock Option Agreement used in
connection with the Incentive Stock Plan (20)**10.3
    
    
    1990 Employee Stock Purchase Plan (9)**10.5
    
    
    Form of participation agreement
used in connection with the 1990 Employee Stock Purchase Plan (11)**10.6
    
    
    1997 Non-officer Stock Option Plan,
as amended and restated on January 19, 2001 (12)**10.7
    
    
    Stock Option Agreement used in
connection with the 1997 Non-Officer Stock Option Plan (10)**10.8
    
    
    2004 Exabyte Corporation Stock
Option Plan (13)**10.9
    
    
    Form of Stock Option Agreement used
in connection with the 2004 Stock Option Plan (13)10.10
    
    
    Form of Indemnity Agreement entered
into by the Company with each director and executive officer of the
Company (13)*10.11
    
    
    Manufacturing and Purchase
Agreement, dated March 1, 2001, among Hitachi, Ltd., Nihon
Exabyte Corporation and Exabyte Corporation (14)10.12
    
    
    Exabyte Purchase Agreement between
the Company and Singapore Shinei Sangyo PTE., Ltd., dated
February 3, 1999 (1)10.13
    
    
    Amendment #A01 to Purchase
Agreement between the Company and Singapore Shinei Sangyo, dated
January 24, 2001 (1)10.14
    
    
    Supplier Managed Inventory
Agreement between the Company and Singapore Shinei Sangyo, dated
January 24, 2001 (20)10.15
    
    
    Lease Agreement between Industrial
Housing Company LLC and Ecrix Corporation, dated December 14,
1998,as amended (2)10.16
    
    
    Lease Agreement between Cottonwood
Farms Ltd. and Ecrix Corporation, dated September 7, 1999, as amended (2)10.17
    
    
    Amendment to Lease between
Cottonwood Land and Farms, Ltd. and Ecrix Corporation, dated
April 15, 2000 (2)*10.18
    
    
    Exabyte Payment and Repayment Plan
Memorandum of Understanding, by and between Exabyte Corporation and
Nihon Exabyte Corporation, and Hitachi, Ltd., dated February 14, 2003 (8)10.19
    
    
    Amendment dated November 1,
2005 to the Memorandum of Understanding, by and between the Company
and Hitachi, Ltd., originally dated February 14, 2003 (15)*10.20
    
    
    Exabyte Payment and Repayment Plan,
among the Company, Nihon Exabyte Corporation and Hitachi, Ltd., dated
August 25, 2003 (16)*10.21
    
    
    Agreement for Debt Restructuring
and Modification of Manufacturing Terms, among the Company, Solectron
Corporation and Shinei International Pte. Ltd., dated September 1,
2003 (16)




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##### Table of Contents



Exhibit Number
    
    
    Description*10.22
    
    
    Manufacturing Service Agreement,
among the Company and Solectron Corporation, dated May 28,
2004 (13)*10.23
    
    
    Depot Repair Services Agreement,
among the Company and Teleplan Service Logistics, Inc., dated
June 2003 (16)*10.24
    
    
    Amendment #A01 to Depot Repair
Services Agreement, among the Company and Teleplan Service Logistics,
Inc., dated October 2004 (13)*10.25
    
    
    Settlement Agreement, among the
Company and 1685-1775 38th St, LLC, dated November  4, 2003 (16)10.26
    
    
    Lease Termination Agreement, among
the Company and Eastpark, LLC f/k/a Eastpark Associates, Ltd., dated
September 26, 2003 (16)10.27
    
    
    Promissory Note among the Company
and Eastpark, LLC f/k/a Eastpark Associated Ltd., dated
September 1, 2003 (16)*10.28
    
    
    Media Distribution Agreement, by
and between Exabyte Corporation and Imation Corp, dated
November 7, 2003 (17)10.29
    
    
    Amendment No. 2 to Media
Distribution Agreement, by and between Exabyte Corporation and
Imation Corporation with forms of the $5,000,000 Note and $2,000,000
Note (7)*10.30
    
    
    Software License and Maintenance
Agreement, by and between Exabyte Corporation and MSS Technologies,
Inc., dated November 26, 2003 (17)*10.31
    
    
    Manufacturing and Purchase
Agreement, by and between Exabyte Corporation and ESGW International
Limited, dated January 20, 2004 (13)*10.32
    
    
    Joint Development Agreement, by and
between the company and Hitachi, Ltd., dated June 2004 (13)10.33
    
    
    Form of Exchange Agreement executed
by holders of Exabyte Corporation Series H Preferred Stock (6)10.34
    
    
    Form of Exchange Agreement executed
by holders of Exabyte Corporation Series I Preferred Stock (6)10.35
    
    
    Securities Purchase Agreement,
dated as of April 30, 2004, by and between Exabyte Corporation
and each ofthe Purchasers (6)10.36
    
    
    Registration Rights Agreement,
dated as of May 3, 2004, by and between Exabyte Corporation and
each of the Purchasers (6)*10.37
    
    
    Credit and Security Agreement, by
and between the Company and Wells Fargo Business Credit, Inc., dated
March 9, 2005 (13)10.38
    
    
    Amendment No. 1 dated
August 12, 2005 to the Credit and Security Agreement by and
between the Company and Wells Fargo Business Credit, Inc., dated
March 9, 2005 (18)10.39
    
    
    Second Amendment (dated
October 31, 2005) to the Credit and Security Agreement between the
Company and Wells Fargo Bank, National Association acting through its
Wells Fargo Business Credit division (7)10.40
    
    
    Securities Purchase Agreement,
dated as of October 31, 2005, by and between Exabyte Corporation
and each of the Purchasers (7)10.41
    
    
    Registration Rights Agreement,
dated as of October 31, 2005, by and between Exabyte Corporation
and each of the Purchasers (7)10.42
    
    
    Security Agreement, dated
October 31, 2005, by and between Exabyte Corporation and each of
the Purchasers (7)10.43
    
    
    Intercreditor Agreement, dated
October 31, 2005, among Exabyte Corporation, Wells Fargo Bank,
Purchasers of the Convertible Notes and Imation (7)10.44
    
    
    Amendment No. 1 to the
Series AA Securities Purchase Agreement, effective as of
October 5, 2005, among the Company and certain Purchasers of the
Series AA Preferred Stock (7)10.45
    
    
    Agreement for Issuance of Stock,
dated as of October 31, 2005, between Exabyte Corporation and
Imation Corp. (7)**10.46
    
    
    Employment letter agreement, dated
May 30, 2002, between Exabyte and Mr. Ward (19)**10.47
    
    
    Investment letter agreement, dated
May 30, 2002, between Exabyte and Mr. Ward, with approval
of other Series I preferred purchasers to be obtained (19)**10.48
    
    
    Exabyte Corporation Non-Statutory
Stock Option Agreement, dated June 3, 2002 between Exabyte and
Mr. Ward (19)**10.49
    
    
    Exabyte Corporation Non-Statutory
Stock Option Agreement, dated August 22, 2003 between Exabyte and
Mr. Ward (20)




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##### Table of Contents



Exhibit Number
    
    Description**10.50
    
    Extension dated July 29, 2005 of
employment letter agreement between Exabyte and Mr. Ward (20)21.1
    
    List of Subsidiaries23.1
    
    Consent of PricewaterhouseCoopers LLP23.2
    
    Consent of Ehrhardt Keefe Steiner & Hottman P.C.24.1
    
    Power of Attorney. Reference is made to the signature page.31.1
    
    Rule 13a-14(a) Certification of the Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of the Chief Financial Officer32.1
    
    Section 1350 Certification
 
   (1)
    
    Filed as an Exhibit to the Companys Registration
Statement on Form S-4, filed with the SEC on September 21, 2001, and incorporated herein by reference.
 (2)
    
    Filed as an Exhibit to Amendment No. 1 to the
Companys Registration Statement on Form S-4, filed with
the SEC on October 5, 2001, and incorporated herein by reference.
 (3)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-1 (Registration No.
33-30941) filed with the Securities and Exchange Commission (the
SEC) on September 8, 1989 or Amendments Nos. 1 and 2 thereto (filed on October 12, 1989 and October 16, 1989 respectively), and incorporated herein by reference.
 (4)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8A/A filed with the SEC on June 7, 2002 and incorporated herein by reference.
 (5)
    
    Filed as an Exhibit to the Companys Registration Statement on Form 8-A/A filed with the SEC on June 7, 2002 and incorporated herein by reference.
 (6)
    
    Filed as an Exhibit to the Companys Current Report on Form 8-K, filed with the SEC on May 4, 2004, and incorporated herein by reference.
 (7)
    
    Filed as an Exhibit to the Companys Form 8-K filed with the SEC on November 1, 2005, and incorporated herein by reference.
 (8)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on March 28, 2003, and incorporated herein by reference.
 (9)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-09279), as filed with the SEC on June 16, 2000 and incorporated herein by reference.
 (10)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-73011), as filed with the SEC on March 1, 2000, and incorporated herein by reference.
 (11)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 33-33414), as filed with the SEC on February 9, 1990 and incorporated herein by reference.
 (12)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-8 (Registration No. 333-67464), as filed with the SEC on August 14, 2001, and incorporated herein by reference.
 (13)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on March 21, 2005, and incorporated herein by reference.
 (14)
    
    Filed as an Exhibit to the Companys Annual Report on Form 10-K, filed with the SEC on April 27, 2001, and incorporated herein by reference.
 (15)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2005, and incorporated by reference
 (16)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2003, and incorporated herein by reference.
 (17)
    
    Filed as an Exhibit to the Companys Annual Report on form 10-K, filed with the SEC on March 31, 2004, and incorporated herein by reference.
 (18)
    
    Filed as an Exhibit to the Companys Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2005, and incorporated by reference.
 (19)
    
    Filed as an Exhibit to the Companys Form 8-K filed with the SEC on June 3, 2002, and incorporated herein by reference.
 (20)
    
    Filed as an Exhibit to the Companys Registration Statement on Form S-1 filed with the SEC on December 6, 2005, and incorporated herein by reference.